##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-50705
 
 SHANDA INTERACTIVE ENTERTAINMENT LIMITED
  
 
 Cayman Islands
 No. 208 Juli Road
Pudong New Area
Shanghai 201203, Peoples Republic of China
 Grace Wu
Chief Financial Officer
Shanda Interactive Entertainment Limited
No. 208 Juli Road
Pudong New Area
Shanghai 201203, Peoples Republic of China
Telephone: (86-21) 6058-8688
Fax: (86-21) 5080-5132
 
  Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares, each representing
    
    The NASDAQ Stock Market LLC2 ordinary shares, par value US$0.01 per share
    
    The NASDAQ Global Select Market
  [None]
  [None]
   þ o
  o þ
  þ o
  o o
  þ Large accelerated filer
    
    o Accelerated filer
    
    o Non-accelerated filer
  þ U.S. GAAP
    
    o International Financial Reporting Standards as issued by the International Accounting Standard Boards
    
    o Other
  o o
  o þ




---



##### 



TABLE OF CONTENTS
 PageItem 1. Identity of Directors, Senior Management and Advisors
    
    
    5Item 2. Offer Statistics and Expected Timetable
    
    
    5Item 3. Key Information
    
    
    5Item 4. Information on the Company
    
    
    58Item 4A. Unresolved Staff Comments
    
    
    79Item 5. Operating and Financial Review and Prospects
    
    
    79Item 6. Directors, Senior Management and Employees
    
    
    107Item 7. Major Shareholders and Related Party Transactions
    
    
    115Item 8. Financial Information
    
    
    118Item 9. The Offer and Listing
    
    
    119Item 10. Additional Information
    
    
    120Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    127Item 12. Description of Securities Other Than Equity Securities
    
    
    127Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    128Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    128Item 15. Controls and Procedures
    
    
    128Item 16A. Audit Committee Financial Expert
    
    
    129Item 16B. Code of Ethics
    
    
    129Item 16C. Principal Accountant Fees and Services
    
    
    130Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    130Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    130Item 16F. Change in Registrants Certifying Accountant
    
    
    131Item 16G. Corporate Governance
    
    
    131Item 17. Financial Statements
    
    
    131Item 18. Financial Statements
    
    
    131Item 19. Exhibits
    
    
    132Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1
   i




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##### Table of Contents



Introduction
 CONVENTIONS WHICH APPLY TO THIS FORM
  
    
    Bianfeng entities refers to Hangzhou Bianfeng Networking Technolgy Co., Ltd., or
Hangzhou Bianfeng, Shangrao Yunwang Technology Co., Ltd., or Yunwang, Suzhou Jinyou Digital
Technology Co., Ltd., or Jinyou, Suzhou Dajiale Networking Technology Co., Ltd., or
Dajiale, Nantong Jiguang Software Co., Ltd., or Jiguang, and Beijing Yokagames Culture
Development Co., Ltd., or Yokagames;
 
    
    Cloudary Corporation refers to Cloudary Corporation (formerly known as Shanda
Literature Corporation), a Cayman Islands company, and, unless the context requires
otherwise, its subsidiaries, including Cloudary Holdings Limited (formerly known as Shanda
Literature Limited (HK)), Shengting Information Technology (Shanghai) Co., Ltd., or
Shengting, and, in the context of describing its operations, also includes its VIEs,
including Hongwen entities;
 
    
    Hongwen entities refers to Shanghai Hongwen Networking Technology Co., Ltd, or
Hongwen, Shanghai Xuanting Entertainment Information Technology Co., Ltd., or Xuanting,
Hong Xiu Tian Xiang Science and Technology Development (Beijing) Co., Ltd., or Hong Xiu,
Tianjin Rongshuxia Information Technology Co., Ltd., or Rongshuxia, Tianjin Jushi Wenhua
Book Distribution Co., Ltd., or Jushi, Tianjin Huawen Tianxia Book Co., Ltd., or Huawen,
Tianjin Zhongzhi Bowen Book Co., Ltd., or Zhongzhi, Beijing Wangwen Xinyue Technology Co.,
Ltd., or Wangwen Xinyue, Suzhou Jingwei Network Technology Co., Ltd., or Jingwei, Shanghai
Cuilong Culture Communication Co., Ltd., or Cuilong, Xiaoxiang Shuyuan (Tianjin) Culture
Development Co., Ltd., or Xiaoxiang Shuyuan, Tianjin Shengda Tianfang Tingshu Information
Technology Co., Ltd., or Tianfang Tingshu, Tianjin Yueduwang Technology Co., Ltd., or
Yueduwang, Beijing Shanda New Classics Film & TV Culture Co., Ltd., or Shanda New Classics,
and Zhejiang Huayun Digitial Technology Co., Ltd., or Zhejiang Huayun;
 
    
    Hurray refers to Hurray! Solutions Communication Co., Ltd., or Hurray! Solutions, and
Hurray! Digital Media Technology Co., Ltd., or Hurray! Digital;
 
    
    Hurray Holding refers to Hurray! Holding Co., Ltd., a Cayman Islands company. In July
2009 we closed the tender offer of 52.6% of the outstanding shares of Hurray Holding
(NASDAQ: HRAY). In August 2010, we and Hurray Holding completed a series of asset
transactions. Hurray Holding acquired 75% of an online audio business from us for a
consideration of 415,384,615 newly issued ordinary shares of Hurray Holding and acquired
the remaining 25% from a minority shareholder for a consideration of 138,461,539 newly
issued ordinary shares of Hurray Holding. We acquired Hurray Holdings recorded music and
WVAS businesses for an aggregate consideration of US$37,243,904 in cash. In August 2010,
Hurray Holding changed its name from Hurray! Holding Co., Ltd. to Ku6 Media Co., Ltd.
 
    
    Ku6 refers to Ku6 Media Co., Ltd., a Cayman Islands company, and, unless the context
requires otherwise, its subsidiaries, including Ku6 Holding Limited, Ku6 PRC Subsidiaries,
and, in the context of describing its operations, also includes its VIEs, including Ku6
entities;
 
    
    Ku6 PRC Subsidiaries refers to Ku6 (Beijing) Technology Co., Ltd., and WeiMo San Yi
(Tianjin) Technology Co., Ltd;
 
    
    Ku6 entities refers to Ku6 (Beijing) Information Technology Co., Ltd., or Beijing Ku6,
Tianjin Ku6 Zheng Yuan Information Technology Co., Ltd., or Tianjin Ku6, Shanghai Yisheng
Networking Technology Co., Ltd., or Yisheng, Ku6 (Beijing) Culture Media Co., Ltd., or Ku6
Culture, and Shanghai Ran Ya Information Technology Co., Ltd., or Ran Ya;
  2




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##### Table of Contents




    
    Reorganization refers to the reorganization effort which we commenced in 2008,
resulting in the establishment of Shanda Games, Shanda Online and Cloudary Corporation
(formerly known as Shanda Literature Corporation);
 
    
    Separation refers to our transfer effective July 1, 2008 of substantially all of our
assets and liabilities related to the MMORPG and advanced casual game business to Shanda
Games, and Shengqus transfer of substantially all of its assets and liabilities unrelated
to the MMORPG and advanced casual game business to Shanda Computer and our other entities;
 
    
    SDG Overseas Corps refers to Shanda Games Technology (HK) Limited, Shanda Games
Holdings (HK) Limited, Mochi Media, Inc., Shanda Games International (Pte) Ltd., Eyedentity
Games, Inc., Goldcool Holdings Limited, Goldcool Holdings (HK) Limited, Shanda Games Korean
Investment Limited and Actoz Soft Co., Ltd.;
 
    
    SDG PRC Subsidiaries refers to Lansha Information Technology (Shanghai) Co., Ltd., or
Lansha, Shengji Information Technology (Shanghai) Co., Ltd., or Shengji, Shengqu
Information Technology (Shanghai) Co., Ltd., or Shengqu and Kuyin Software (Shanghai) Co.,
Ltd., or Kuyin;
 
    
    SDG entities refers to Shanghai Shulong Technology Development Co., Ltd., or Shanghai
Shulong, Nanjing Shulong Computer Co., Ltd., or Nanjing Shulong, Shanghai Shulong Computer
Technology Co., Ltd., or Shulong Computer, Chengdu Simo Technology Co., Ltd., or Chengdu
Simo, Chengdu Aurora Technology Development Co., Ltd., or Chengdu Aurora, Tianjin Youji
Technology Co., Ltd., or Tianjin Youji, Chengdu Youji Technology Co., Ltd., or Chengdu
Youji, and Shanghai Hongli Digital Technology Co., Ltd., or Shanghai Hongli;
 
    
    Shanda Casual Community refers to Shanda Casual Community Limited, a Cayman Islands
company, and, unless the context requires otherwise, its subsidiaries, including Shanda
Board Game Corporation, a Cayman Islands company, Grandpro Technology Limited, a British
Virgin Islands company, Bianfeng Interactive Software Limited, Zhejiang Bianfeng
Information Technology Co., Ltd., or Zhejiang Bianfeng, Grandpro Technology (Shanghai) Co.,
Ltd., or Grandpro, and, in the context of describing its operations, also includes its
VIEs, including Bianfeng entities and Shanghai Haofang Online Information Technology Co.,
Ltd., or Haofang;
 
    
    Shanda Games refers to Shanda Games Limited, a Cayman Islands company, and, unless the
context requires otherwise, includes its subsidiaries, including SDG Overseas Corps, SDG
PRC Subsidiaries and, in the context of describing its operations, its VIEs, including the
SDG entities;
 
    
    Shanda Interactive refers to Shanda Interactive Entertainment Limited;
 
    
    Shanda Online refers to Shanda Online Entertainment Limited, a Cayman Islands company,
and, unless the context requires otherwise, includes its subsidiaries, including Shanda
Online International (HK) Limited, Shanda Computer (Shanghai) Co., Ltd., or Shanda
Computer, and, in the context of describing its operations, also includes its VIEs,
including Shanda Networking Co., Ltd., or Shanda Networking, and Shengzhan entities;
 
    
    Shengzhan entities refers to Shanghai Shengzhan Networking Technology Co., Ltd., or
Shengzhan, Shanghai Yichong Electronic Business Co., Ltd., or Yichong, Nanjing Shanda
Networking Co., Ltd., or Nanjing Shanda and Tianjin Shengjing Trade Co., Ltd., or
Shengjing;
 
    
    VIEs refers to variable interest entities;
 
    
    VIE agreements refers to a series of contractual arrangements between a PRC company,
on the one hand, and its VIEs and their shareholders, on the other hand, including
contracts relating to the provision of services, software licenses and equipment, and
certain shareholder rights and corporate governance matters; and
    
    we, us, our company and our refer to Shanda Interactive Entertainment Limited,
its predecessor entities and its consolidated subsidiaries and affiliates.
  3




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##### Table of Contents



FORWARD-LOOKING INFORMATION
  
    
    our goals and strategies;
 
    
    our future business development, financial condition and results of operations;
 
    
    our projected revenues, earnings, profits and other estimated financial information;
 
    
    expected changes in our margins and certain costs or expenditures;
 
    
    our plans to expand and diversify the sources of our revenues;
 
    
    expected changes in the respective shares of our revenues from particular sources;
 
    
    our plans for staffing, research and development and regional focus;
 
    
    our plans to launch new products and services, and their projected economic lifespans;
 
    
    our plans for strategic partnerships with other businesses;
 
    
    our acquisition and divestiture strategy, and our ability to successfully integrate past
or future acquisitions with our existing operations and complete planned divestitures;
 
    
    competition in the relevant industries;
 
    
    the outcome of ongoing, or any future, litigation or arbitration;
 
    
    the outcome of our annual PFIC evaluation;
 
    
    the expected growth in the number of Internet and broadband users in China, growth of
personal computer penetration and developments in the ways most people in China access the
Internet;
 
    
    changes in PRC governmental preferential tax treatment and financial incentives we
currently qualify for and expect to qualify for; and
 
    
    PRC governmental policies relating to media and the Internet and Internet content
providers and to the provision of advertising online games and literary content over the
Internet.
   4




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##### Table of Contents



EXCHANGE RATE INFORMATION
   Exchange RatePeriod
    
    Period end
    
    
    Average(1)
    
    
    High
    
    
    Low(RMB per US$1.00)2006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8172
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010
    
    
    6.6000
    
    
    
    6.7696
    
    
    
    6.8330
    
    
    
    6.60002011January
    
    
    6.6017
    
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5809February
    
    
    6.5713
    
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520March
    
    
    6.5483
    
    
    
    6.5645
    
    
    
    6.5483
    
    
    
    6.5743April
    
    
    6.4900
    
    
    
    6.5267
    
    
    
    6.5477
    
    
    
    6.4900May
    
    
    6.4786
    
    
    
    6.4957
    
    
    
    6.5073
    
    
    
    6.4786June (through June 24, 2011)
    
    
    6.4737
    
    
    
    6.4757
    
    
    
    6.4830
    
    
    
    6.4628
 
 (1)
    
    Annual averages were calculated by using the average of the exchange rates on the last day of
each month during the relevant year. Monthly averages were calculated by using the average of
the daily rates during the relevant month. PART I
 
 Item 1.
    
    Identity of Directors, Senior Management and Advisors
  
 Item 2.
    
    Offer Statistics and Expected Timetable
  
 Item 3.
    
    Key Information
 A. SELECTED FINANCIAL DATA
   5




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##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(Adjusted)(1)(in thousands)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Consolidated
Statements of
Operations and
Comprehensive Income
Data:Net revenues
    
    
    1,654,460
    
    
    
    2,467,265
    
    
    
    3,569,068
    
    
    
    5,235,378
    
    
    
    5,572,250
    
    
    
    844,280Cost of revenue
    
    
    (689,805
    )
    
    
    (807,102
    )
    
    
    (1,020,470
    )
    
    
    (1,477,626
    )
    
    
    (2,153,542
    )
    
    
    (326,294
    )Gross profit
    
    
    964,655
    
    
    
    1,660,163
    
    
    
    2,548,598
    
    
    
    3,757,752
    
    
    
    3,418,708
    
    
    
    517,986Operating expenses
    
    
    (587,023
    )
    
    
    (658,199
    )
    
    
    (1,106,315
    )
    
    
    (1,713,365
    )
    
    
    (2,567,880
    )
    
    
    (389,073
    )Operating income from
continuing operations
    
    
    377,632
    
    
    
    1,001,964
    
    
    
    1,442,283
    
    
    
    2,044,387
    
    
    
    850,828
    
    
    
    128,913Interest income and
investment income
    
    
    97,104
    
    
    
    535,622
    
    
    
    80,771
    
    
    
    113,640
    
    
    
    148,194
    
    
    
    22,454Interest expenses
    
    
    (174,653
    )
    
    
    (144,091
    )
    
    
    (30,023
    )
    
    
    (100,739
    )
    
    
    (102,606
    )
    
    
    (15,546
    )Other income, net
    
    
    133,913
    
    
    
    28,041
    
    
    
    29,380
    
    
    
    203,577
    
    
    
    254,830
    
    
    
    38,610Income before income
tax expenses from
continuing operations
    
    
    433,996
    
    
    
    1,421,536
    
    
    
    1,522,411
    
    
    
    2,260,865
    
    
    
    1,151,246
    
    
    
    174,431Income tax expenses
    
    
    (36,489
    )
    
    
    (133,836
    )
    
    
    (276,471
    )
    
    
    (485,797
    )
    
    
    (369,759
    )
    
    
    (56,024
    )Equity in loss of
affiliated companies
    
    
    (26,227
    )
    
    
    (15,503
    )
    
    
    (337
    )
    
    
    (50,545
    )
    
    
    (8,993
    )
    
    
    (1,363
    )Income from continuing
operations, net of tax
    
    
    371,280
    
    
    
    1,272,197
    
    
    
    1,245,603
    
    
    
    1,724,523
    
    
    
    772,494
    
    
    
    117,044
  6




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##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(Adjusted)(1)(in thousands)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Discontinued operations:Loss from discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,968
    )
    
    
    (47
    )
    
    
    (7
    )Gain from disposal of
discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,604
    
    
    
    4,637Income (loss) from
discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,968
    )
    
    
    30,557
    
    
    
    4,630Net income
    
    
    371,280
    
    
    
    1,272,197
    
    
    
    1,245,603
    
    
    
    1,719,555
    
    
    
    803,051
    
    
    
    121,674Add: Net loss
attributable to the
non-controlling
interests from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,433
    
    
    
    11
    
    
    
    2Less: Net income
attributable to
non-controlling
interests from continuing operations
    
    
    767
    
    
    
    (7,015
    )
    
    
    (12,158
    )
    
    
    (116,176
    )
    
    
    (178,181
    )
    
    
    (26,997
    )Less: Net income attributable to redeemable
preferred shares issued by a subsidiary and redeemable non-controlling interests from continuing operations
    
    
    
    
    
    
    
    
    
    
    (4,471
    )
    
    
    (13,248
    )
    
    
    (10,730
    )
    
    
    (1,626
    )Net income attributable
to Shanda Interactive
    
    
    372,047
    
    
    
    1,265,182
    
    
    
    1,228,674
    
    
    
    1,592,564
    
    
    
    614,151
    
    
    
    93,053
 For the year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(in thousands, except per share and per ADS data)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Earnings per Share Data:Income from continuing
operations, net of tax,
attributable to Shanda Interactive
Entertainment Limited
    
    
    372,047
    
    
    
    1,265,182
    
    
    
    1,228,674
    
    
    
    1,595,100
    
    
    
    583,582
    
    
    
    88,422Income (loss) from discontinued
operations, net of tax,
attributable to Shanda Interactive
Entertainment Limited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,536
    )
    
    
    30,569
    
    
    
    4,631Income attributable to Shanda
Interactive
    
    
    372,047
    
    
    
    1,265,182
    
    
    
    1,228,674
    
    
    
    1,592,564
    
    
    
    614,151
    
    
    
    93,053Earnings per share-Basic:Income from continuing operations
attributable to Shanda Interactive
Entertainment Limited common
shareholders
    
    
    2.61
    
    
    
    8.83
    
    
    
    8.59
    
    
    
    11.88
    
    
    
    4.86
    
    
    
    0.74Income (loss) from discontinued
operations attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    0.25
    
    
    
    0.03Net income attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    2.61
    
    
    
    8.83
    
    
    
    8.59
    
    
    
    11.86
    
    
    
    5.11
    
    
    
    0.77
  7




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##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(in thousands, except per share and per ADS data)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Earnings per share- Diluted:Income from continuing operations
attributable to Shanda Interactive
Entertainment Limited common
shareholders
    
    
    2.57
    
    
    
    8.65
    
    
    
    8.49
    
    
    
    11.47
    
    
    
    4.74
    
    
    
    0.72Income (loss) from discontinued
operations attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    0.25
    
    
    
    0.03Net income attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    2.57
    
    
    
    8.65
    
    
    
    8.49
    
    
    
    11.45
    
    
    
    4.99
    
    
    
    0.75Earnings per ADS-Basic: (2)Income from continuing operations
attributable to Shanda Interactive
Entertainment Limited common
shareholders
    
    
    5.22
    
    
    
    17.66
    
    
    
    17.18
    
    
    
    23.76
    
    
    
    9.72
    
    
    
    1.48Income (loss) from discontinued
operations attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )
    
    
    0.50
    
    
    
    0.06Net income attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    5.22
    
    
    
    17.66
    
    
    
    17.18
    
    
    
    23.72
    
    
    
    10.22
    
    
    
    1.54Earnings per ADS- Diluted: (2)Income from continuing operations
attributable to Shanda Interactive
Entertainment Limited common
shareholders
    
    
    5.14
    
    
    
    17.30
    
    
    
    16.98
    
    
    
    22.94
    
    
    
    9.48
    
    
    
    1.44Income (loss) from discontinued
operations attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )
    
    
    0.50
    
    
    
    0.06Net income attributable to Shanda
Interactive Entertainment Limited
common shareholders
    
    
    5.14
    
    
    
    17.30
    
    
    
    16.98
    
    
    
    22.90
    
    
    
    9.98
    
    
    
    1.50
  8




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##### Table of Contents



As of December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(in thousands)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Consolidated Balance Sheets Data:Cash and cash equivalents
    
    
    1,291,901
    
    
    
    1,985,302
    
    
    
    3,397,844
    
    
    
    10,959,313
    
    
    
    5,550,160
    
    
    
    840,933Total assets
    
    
    5,143,246
    
    
    
    4,762,732
    
    
    
    6,467,847
    
    
    
    16,159,447
    
    
    
    14,892,820
    
    
    
    2,256,488Total liabilities
    
    
    2,591,981
    
    
    
    923,017
    
    
    
    2,348,053
    
    
    
    3,012,172
    
    
    
    4,105,009
    
    
    
    621,971Redeemable preferred shares issued
by a subsidiary and redeemable
non-controlling interests
    
    
    
    
    
    
    
    
    
    
    144,735
    
    
    
    157,983
    
    
    
    25,296
    
    
    
    3,833Total Shanda Interactive
shareholders equity
    
    
    2,548,355
    
    
    
    3,623,417
    
    
    
    3,831,029
    
    
    
    11,546,023
    
    
    
    8,707,657
    
    
    
    1,319,342Non-controlling interests
    
    
    2,910
    
    
    
    216,298
    
    
    
    144,030
    
    
    
    1,443,269
    
    
    
    2,054,858
    
    
    
    311,342Total shareholders equity
    
    
    2,551,265
    
    
    
    3,839,715
    
    
    
    3,975,059
    
    
    
    12,989,292
    
    
    
    10,762,515
    
    
    
    1,630,684
 
 (1)
    
    Reflects the reclassification of the recorded music business operated by Huayi Music as
a discontinued operation.(2)
    
    Each ADS represents two ordinary shares. B. CAPITALIZATION AND INDEBTEDNESS
  C. REASONS FOR THE OFFER AND USE OF PROCEEDS
  D. RISK FACTORS
 Risks Related to Our Online Game Business
 We depend substantially on Shanda Games online game business.
    9




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
    
    any reduction in purchases of virtual items by Mir II or Woool players;
 
    
    a decrease in the popularity of either game in China due to increased competition or
other factors;
 
    
    the loss of its rights to operate either game due to a termination of a license or other
reasons;
 
    
    failure to improve, update or enhance Mir II or Woool in a timely manner; or
 
    
    any lasting or prolonged server interruption due to network failures or other factors or
any other adverse developments specific to Mir II or Woool.
   Shanda Games future success relies on developing and sourcing new online games.
  In-house development of new online games and introduction of expansion packs for Shanda Games
existing online games.
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Maintaining good relationships with its licensors, extending licenses for its existing licensed
online games and licensing new online games
  Investments in and acquisitions of other businesses that Shanda Games believes may benefit its
business.
  Sourcing of new online games through cooperation.
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Shanda Games new games may not be commercially successful, and Shanda Games may fail to launch
new games according to its timetable, or at all.
  Shanda Games new games may attract game players away from its existing games.
  Changes or adjustments Shanda Games makes to its existing or new games may not be well received by
its game players.
  The revenue models Shanda Games adopts for its online games may not be suitable.
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Shanda Games faces risks associated with the licensing of its games internationally, and if it is
unable to effectively manage these risks, its ability to expand its business internationally could
be impaired.
   
    
    identifying and maintaining good relations with game operators who are knowledgeable in,
and can effectively distribute and operate its games in, international markets;
 
    
    negotiating licensing agreements with game operators on terms that are commercially
acceptable to Shanda Games and enforcing the provisions of those agreements;
 
    
    developing games, updates and expansion packs catering to overseas markets and renewing
Shanda Games license agreements with game operators upon expiration;
 
    
    maintaining the reputation of Shanda Games and its games, given that its games are
operated by game operators in the international markets with different standards;
 
    
    protecting Shanda Games intellectual property rights overseas and managing the related
costs;
 
    
    receiving and auditing the royalties Shanda Games is entitled to receive;
 
    
    complying with the different commercial and legal requirements of the international
markets in which Shanda Games games are offered, such as game import regulatory
procedures, taxes and other restrictions and expenses; and
 
    
    managing foreign currency risks.
  Shanda Games business may be materially harmed if its online games are not featured prominently
in a sufficient number of Internet cafes in China.
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The growth of the online game industry and market acceptance of Shanda Games online games remains
uncertain.
  
    
    the growth rate in the number of users of personal computers, Internet and broadband in
China and other markets in which Shanda Games online games are offered;
 
    
    whether the online game industry, particularly in China and the rest of the Asia-Pacific
region, continues to grow and the rate of any such growth;
 
    
    changes in consumer demographics, tastes or preferences;
 
    
    the popularity and price of new online games and virtual items that Shanda Games and its
competitors launch and distribute;
 
    
    Shanda Games ability to timely upgrade and improve its existing games to extend their
commercial lifespan and to maintain or expand their market share in the online game
industry;
 
    
    the availability and popularity of other forms of entertainment, particularly console
system games, which are popular in many other countries and are becoming increasingly
popular in China and other countries or regions in which Shanda Games markets its online
games; and
 
    
    general economic conditions, particularly economic conditions that impact the level of
discretionary consumer spending.
  Shanda Games may not be able to adapt to the rapidly evolving online game industry in China.
  Shanda Games faces significant competition in the online game industry in China.
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The global financial and economic crisis, particularly the slowdown in the Chinese economy, may
adversely affect our business, results of operations and financial condition.
  If Shanda Games fails to anticipate or successfully implement new technologies, its games may
become obsolete or uncompetitive.
  Shanda Games online games may contain errors or defects and are susceptible to cheating programs.
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Risks Related to Shanda Online
 Our companys content providers depend on Shanda Online to provide services that are critical to
our business.
  Because Shanda Online offers its services to third-party content providers, our users may consume
less of our internal content.
  We could be liable for failure of, disruptions in, or third-party breaches of security of Shanda
Onlines online payment platform.
  Shanda Online relies on third-party distributors to maintain a stable and efficient distribution
and payment network.
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Shanda Onlines business may be affected by network interruptions, capacity shortfalls, security
breaches or computer viruses and is subject to online security risks, including security breaches
and identity theft.
   
    
    any breakdowns or system failures resulting in a sustained shutdown of all or a material
portion of Shanda Onlines servers, including failures which may be attributable to
sustained power shutdowns, or efforts to gain unauthorized access to its systems causing
loss or corruption of data or malfunctions of software or hardware;
 
    
    any unanticipated surge in users or inability to support content resulting in an
overload to Shanda Onlines server network which may cause interruptions to the service;
and
 
    
    any disruption or failure in the national backbone network, which would prevent our
users outside Shanghai from logging on to any of our content, for which the servers are all
located in Shanghai.
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The successful operation of Shanda Onlines business and implementation of its growth strategies,
including its ability to accommodate additional content providers and users in the future, depend
upon the performance and reliability of the Internet infrastructure and fixed-line and wireless
telecommunications networks in China.
  Shanda Online is dependent on the business performance of its content provider customers and
especially relies on Shanda Games for a substantial portion of its revenues.
   Use of Shanda Onlines services for illegal purposes could harm its business.
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Customer complaints or negative publicity about customer support or anti-fraud measures could
diminish use of Shanda Onlines services.
   Risks Related to Ku6
 Ku6 is operating with a small amount of working capital. If Ku6 cannot obtain additional sources
of liquidity when needed, its growth prospectus and future profitability may be materially and
adversely affected.
  
    
    inability to achieve planned operating results that could increase
liquidity requirements beyond those considered in its business plan;
 
    
    changes in financial market conditions or its business condition that
could limit its access to existing
credit facilities or make new financings more costly or even unfeasible; and
 
    
    changes in Chinas currency exchange control regulations that could limit
its ability to access cash in China to meet liquidity requirements for its operations
in China or elsewhere;
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Ku6 has a short operating history in a new and unproven market, which makes it difficult to
evaluate its future prospects and may increase the risk that it will not be successful.
  Ku6 has a history of losses, and it may be unable to achieve or sustain profitability.
  
    
    growth of the online video industry and the online advertising market;
 
    
    the continued acceptance of its online video content by its users;
 
    
    the continued growth and maintenance of its user base;
 
    
    its ability to control its costs and expenses; and
 
    
    its ability to provide new advertising services to meet the demands of its advertising
customers.
  Ku6 operates in a highly competitive market and may not be able to compete successfully against
its competitors.
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Ku6 operates in a capital-intensive industry and requires a significant amount of cash to fund its
operations and bandwidth, content and technology acquisitions. If Ku6 cannot obtain sufficient
capital, its business, financial condition and prospects may be materially and adversely affected.
  
    
    future business development, financial condition and results of operations;
 
    
    general market conditions for financing activities by companies in its industry; and
 
    
    macroeconomic, political and other conditions in China and elsewhere.
  The online video industry in China and user acceptance of the online video content provided by Ku6
may not grow as quickly as expected, which may adversely affect its revenues and business
prospects.
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Ku6 depends on studios, distributors and other content owners to license professionally produced
content that it can stream instantly over the Internet. Increases in market prices for
professionally produced content may have an adverse effect on Ku6s business, financial condition
and results of operations.
   Ku6 generates substantially all of its revenues from online advertising. If Ku6 fails to retain
existing advertisers or attract new advertisers to advertise on its website, or if it is unable to
collect accounts receivable from the advertisers or advertising agencies in a timely manner, Ku6s
financial condition, results of operations and prospects may be materially and adversely affected.
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Ku6 depends on a limited number of advertising customers, which include both advertisers and
advertising agencies for a significant portion of its revenues. Failure to maintain relationships
with these advertising customers may cause significant fluctuations or declines in its revenues.
  If Ku6 fails to continue to anticipate user preferences and provide products and services to
attract and retain users, Ku6 may not be able to generate sufficient user traffic to remain
competitive.
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The success of Ku6s business depends on its ability to maintain and enhance Ku6s brand.
 
 Ku6 may not be able to manage its expansion effectively.
  Risks Relate to Cloudary Corporation
 Cloudary Corporation incurred net losses and net operating cash outflows in 2008, 2009, 2010 and
the three months ended March 31, 2011 and may continue to incur losses and cash outflows in the
future.
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Cloudary Corporations profitability depends significantly on its ability to control the copyright
licensing cost relating to its online business.
  The online and mobile literature industries in China and user acceptance of Cloudary Corporations
literary content may not grow as quickly as expected, which may adversely affect Cloudary
Corporations revenues and business prospects.
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Cloudary Corporations online and mobile literature businesses depend heavily on the market
recognition and reputation of its brands, and any harm to its brands or failure to maintain and
enhance its brand recognition may materially and adversely affect Cloudary Corporations business,
financial condition and results of operations.
  
    
    ability to maintain a convenient and reliable user experience as user preferences evolve
and as we expand into new service categories and new business lines;
 
    
    ability to increase brand awareness among existing and potential authors and advertisers
through various means of marketing and promotional activities;
 
    
    ability to adopt new technologies or adapt its websites and its systems to user
requirements or emerging industry standards; and
 
    
    ability to effectively control the quality of third-party merchants, including
telecommunication operators, and to monitor service performance of such third parties as
Cloudary Corporation continues to attract new authors and to integrate literary content
sourcing and distribution channels through its platform.
  Cloudary Corporations prospects and financial results may be adversely affected if it fails to
identify, sign and retain promising authors who generate popular literary content on a scale
sufficient to grow its business.
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Cloudary Corporation is dependent upon the cooperation agreements with China Mobile for a significant
portion of its revenues.
   Cloudary Corporation may be subject to potential disputes on certain provisions of the agreements
it entered into to acquire some of its online or offline businesses, which could have a material
adverse effect on its financial condition and results of operations.
 rongshuxia.com, xxsy.net, readnovel.com,
tingbook.com and zubunet.com xxsy.net
   27




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Cloudary Corporations business, financial condition, results of operations and cash flows may be
materially and adversely affected if it is unable to efficiently manage its inventory and other
risks with respect to its offline publishing business.
  Cloudary Corporation relies on the publishing licenses of third-party publishers for its offline
publications. If such third-party publishers cease to cooperate with Cloudary Corporation on
commercially acceptable terms or at all, or if the PRC regulatory authorities find such
cooperation arrangements to be in violation of PRC laws and regulations governing the publishing
industry, its offline business will be materially and adversely affected.
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Cloudary Corporation operates in a highly competitive market, and its competitors may have various
advantages, including the ability to draw upon a greater depth and breadth of resources than those
available to it. Cloudary Corporations failure to compete successfully in the market could have a
material adverse effect on its business, financial condition and results of operations.
   Cloudary Corporation relies on chain and online bookstores and wholesalers for the sale of its
offline publications.
   29




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Cloudary Corporations offline business depends on third-party delivery companies to deliver its
publications, and their failure to provide high-quality delivery services to chain bookstores and
wholesalers may materially and adversely affect Cloudary Corporations revenues, costs, inventory
and profitability.
   Risks Related to Our Other Businesses
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Hurray depends on China Mobile, China Unicom and China Telecom, the three principal
telecommunications network operators in China, for the major portion of its revenue.
     Hurray may not be able to successfully negotiate favorable terms with the telecommunications
operators and their provincial affiliates.
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Unilateral changes in the policies of the MIIT and the telecommunications operators and in the
enforcement of their policies have resulted in service suspensions and Hurray having to pay
additional charges to the telecommunications operators.
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The telecommunications operators may impose higher service or network fees on Hurray for their own
business purposes or if Hurray is unable to satisfy customer usage and other performance criteria.
   The telecommunications operators may change their practices with regard to how service selections
appear on their WAP portals.
  Other Risks Related to Our Businesses
 Acquisitions and investments could result in operating difficulties, dilution and other harmful
consequences. We may also reorganize our business, including disposition of certain assets.
  
    
    implementation or remediation of controls, procedures and policies at the acquired
company;
 
    
    diversion of management time and focus from operating our business to acquisition
integration challenges;
 
    
    coordination of product, engineering and sales and marketing functions;
 
    
    transition of operations, users and customers onto our existing platforms;
  33




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
    
    cultural challenges associated with integrating employees from the acquired company into
our organization;
 
    
    retention of employees from the businesses we acquire;
 
    
    integration of the acquired companys accounting, management information, human resource
and other administrative systems;
 
    
    liability for activities of the acquired company before and after the acquisition,
including patent and trademark infringement claims, violations of laws, commercial
disputes, tax liabilities and other known and unknown liabilities;
 
    
    litigation or other claims in connection with the acquired company, including claims
from terminated employees, customers, former shareholders or other third parties;
 
    
    in the case of foreign acquisitions, the need to integrate operations across different
cultures and languages and to address the particular economic, currency, political and
regulatory risks associated with specific countries; and
 
    
    failure to successfully further develop the acquired business.
  There can be no assurance that our diversification strategy will achieve its intented strategic
objectives or improve our results of operations.
  Videos, literary and other content displayed on our website or published by us may be found
objectionable by PRC regulatory authorities and may subject us to penalties and other
administrative actions.
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We may be subject to administrative actions by PRC regulatory authorities and other liabilities
because of advertisements shown on our websites.
   We may be subject to intellectual property infringement claims, which may force us to incur
substantial legal expenses and, if determined adversely against us may materially disrupt our
business.
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Unauthorized use of our intellectual property by third parties, and the expenses incurred in
protecting our intellectual property rights, may adversely affect our business.
    If we fail to successfully adopt new technologies or adapt our websites and systems to user and
customer requirements or emerging industry standards, our business, prospects and financial
results may be materially and adversely affected.
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The proper functioning of our websites is essential to our online content business and any failure
to maintain the satisfactory performance, security and integrity of such websites will materially
and adversely affect our business, reputation, financial condition and results of operations.
    We have limited insurance coverage, which could have a material adverse effect on our financial
condition and results of operations.
  We depend on our key personnel, and our business and growth prospects may be severely disrupted if
we lose their services.
    37




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You should not place undue reliance on our financial guidance, nor should you rely on our
quarterly operating results as an indication of our future performance because our quarterly
operating results may be subject to significant fluctuations.
  
    
    our ability to retain existing users, attract new users at a steady rate and maintain
user satisfaction;
 
    
    the announcement or introduction of, or updates to, our existing games and other
entertainment content by us or our competitors;
 
    
    the amount and timing of operating costs and capital expenditures relating to expansion
of our business, operations and infrastructure;
 
    
    governmental regulations;
 
    
    seasonality effect for our business;
 
    
    a shortfall in our revenues relative to our forecasts and a decline in our operating
results due to our inability to adjust to our users spending quickly;
 
    
    the inability to direct the performance of our independent public subsidiaries, Shanda
Games and Ku6;
 
    
    the introduction and nationwide roll-out of the third-generation wireless
telecommunications network in China; and
 
    
    general economic conditions and economic conditions specific to the online entertainment
industry and China.
  We may need to record impairment charges to earnings if our acquisition goodwill, investments in
affiliate companies or acquired intangible assets is determined to be impaired.
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We may lose the ability to consolidate certain of our businesses in our financial statements if
our ownership percentage in those businesses is diluted.
  While we believe that we currently have adequate internal control procedures in place, we are
still exposed to potential risks from legislation requiring companies to evaluate controls under
Section 404 of the Sarbanes-Oxley Act of 2002.
    39




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Risks Related to Regulation of the Internet and to Our Structure
 If the PRC government finds that the agreements that establish the structure for operating our
China business do not comply with PRC government restrictions on foreign investment in the online
service, including online billing and payment service, customer service, prepaid card
distributions, user authentication and data support
service and online culture industry, including online game, online literature and online video, we
could be subject to severe penalties.
    
    
    revoking the business licenses or operating licenses of our PRC subsidiaries or PRC
operating companies;
 
    
    discontinuing or restricting our operations in China, including shutting down our
servers or blocking our websites or discontinuing or placing restrictions or onerous
conditions on our operations;
 
    
    confiscating our income or the income of our PRC subsidiaries or PRC operating
companies;
 
    
    requiring us to undergo a costly and disruptive restructuring such as forcing us to
transfer our equity interest in our PRC subsidiaries to a domestic entity or invalidating
the agreements that our PRC subsidiaries have has entered into with our PRC oeprating
companies and their respective shareholders;
 
    
    restricting or prohibiting our use of proceeds from public offering to finance our
business and operations in China; or
 
    
    taking other regulatory or enforcement actions, including levying fines, that could be
harmful to our business.
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The contractual arrangements related to critical aspects of our operations with our PRC operating
companies and their respective shareholders may not be as effective in providing operational
control as direct ownership.
   Shareholders of our PRC operating companies may potentially have a conflict of interest with us,
and they may breach their contracts with us or cause such contracts to be amended in a manner
contrary to the interest of our company.
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Our arrangements with our PRC operating companies may be subject to scrutiny by the PRC tax
authorities for transfer pricing adjustments.
  
    
    increasing our PRC operating companies tax liability without reducing our PRC
subsidiaries tax liability, which could further result in late payment fees and other
penalties to our PRC operating companies for underpaid taxes; or
 
    
    limiting our PRC subsidiaries ability to maintain preferential tax treatments and
government financial incentives, if the transfer pricing adjustment is significant.
  Our corporate structure may restrict our ability to receive dividends from, and transfer funds to,
our PRC subsidiaries and our PRC operating companies, which could restrict our ability to act in
response to changing market conditions and reallocate funds from one PRC entity to another in a
timely manner.
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PRC regulations relating to the establishment of offshore special purpose companies by PRC
residents may subject our PRC resident beneficial owners or our company to liabilities or
penalties, limit our ability to contribute capital to our PRC subsidiary, limit our PRC
subsidiarys ability to increase its registered capital or distribute profits to us, or otherwise
materially and adversely affect us.
 Notice Concerning Foreign Exchange Controls on Domestic Residents Financing and
Roundtrip Investment Through Offshore Special Purpose Vehicles
   The laws and regulations governing the online entertainment industry in China are developing and
subject to future changes. If we or any of our PRC operating companies fail to obtain or maintain
all applicable permits and approvals, our business and operations would be materially and
adversely affected.
   43




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##### Table of Contents



tingbook.com qidian.com
  If we are required to comply with or are found to violate any laws or regulations governing
virtual currency, prepaid card issuance and usage, online payment or money laundering, we may have
to obtain additional licenses or approvals, be forced to change our current business practice, or
be subject to certain penalties.
     44




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Negative publicity in China has resulted in additional government regulations directed at online
entertainment.
    Shanda Games may be required to reapply for approvals for imported online game products.
    45




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##### Table of Contents



The PRC government has tightened its regulation of Internet cafes, which are currently one of the
primary venues for Shanda Games users to play online games.
  The PRC government may prevent us from distributing, and we may be subject to liability for,
content deemed to be inappropriate.
     46




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##### Table of Contents



Currently there are no laws or regulations in the PRC specifically governing virtual asset
property rights and therefore, it is not clear what liabilities, if any, online entertainment
businesses may have for virtual assets.
    47




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##### Table of Contents



Due to our leading position in several Internet-related industries, we may be subject to claims
under the PRC Anti-Monopoly Law.
   Risks Related to the Peoples Republic of China
  The PRCs economic, political and social conditions, as well as government policies, could affect
our business.
    48




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A severe and prolonged global economic recession and the corresponding slowdown in the Chinese
economy could affect our business.
  The PRC legal system embodies uncertainties which could limit the legal protections available to
you and us.
  The PRC government may discontinue the preferential tax treatments or the government financial
incentives currently available to us in the PRC.
   49




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We may be subject to PRC income tax on our worldwide income if we were considered a PRC resident
enterprise under the New EIT Law.
    50




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##### Table of Contents



We may be required to withhold PRC income tax on the dividends we pay you (if any), and any gain
you realize on the transfer of our ordinary shares and ADSs may also be subject to PRC tax if we
are treated as a PRC resident enterprise.
  PRC Individual Income Tax Law
 The New EIT Law may affect the availability of preferential tax rates under the special tax
arrangement between Hong Kong and mainland China on dividends and interest to be paid by our PRC
subsidiary.
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There is a significant risk that we were a passive foreign investment company, or PFIC, for the
taxable year ending December 31, 2010 and may currently be a PFIC.
  Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
      52




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Fluctuations in exchange rates could result in foreign currency exchange losses.
   Inflation in China and measures to contain inflation could negatively affect our profitability and
growth.
  We may be subject to fines and legal sanctions if we or our Chinese employees fail to comply with
PRC regulations relating to employee stock options granted by overseas listed companies to PRC
citizens.
 Application Procedure for Foreign Exchange Administration
for Domestic Individuals Participating in Employee Stock Holding Plans or Stock Option Plans of
Overseas Listed Companies
  53




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##### Table of Contents



Risks Related to Our ADSs
 As a result of Premium Lead Company Limiteds ownership of our ordinary shares, it will
effectively control the outcome of shareholder actions in our company and may take actions that
might not be beneficial to you as a holder of our ADSs.
  The price of our ADSs has been volatile historically and may continue to be volatile, which may
make it difficult for holders to resell the ADSs when desired or at attractive prices.
   
    
    announcements of technological or competitive developments;
    
    regulatory developments in our target markets affecting us, our customers or our
competitors;
    
    announcements regarding intellectual property rights litigation;
    
    actual or anticipated fluctuations in our quarterly operating results;
    
    changes in financial estimates by securities research analysts;
    
    changes in the economic performance or market valuations of our products;
    
    addition or departure of our executive officers and key research personnel; and
    
    sales or perceived sales of additional ordinary shares or ADSs.
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Conversion of the convertible notes may dilute the ownership interest of existing holders of our
ordinary shares and ADSs.
  We may be unable to raise the funds to pay interest on the convertible notes or to purchase the
convertible notes on the purchase dates or upon a fundamental change.
  Provisions of the convertible notes could discourage an acquisition of us by a third party.
  As a foreign private issuer with ADSs listed on the NASDAQ Global Select Market, we follow certain
home country corporate governance practices instead of certain NASDAQ requirements.
   
    
    our board of directors be comprised of a majority of independent directors;
    
    our directors be selected or nominated by a majority of the independent directors or a
nomination committee comprised solely of independent directors;
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
    
    our board adopt a formal written charter or board resolution addressing the director
nominations process and such related matters as may be required under the U.S. federal
securities laws; and
    
    the compensation of our executive officers be determined or recommended by a majority of
the independent directors or a compensation committee comprised solely of independent
directors.
 We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law, you may have less protection for your
shareholder rights than you would under U.S. law.
    
    
    to recognize or enforce against us judgments of courts of the United States based on
certain civil liability provisions of U.S. securities laws; and
    
    to impose liabilities against us, in original actions brought in the Cayman Islands,
based on certain civil liability provisions of U.S. securities laws that are penal in
nature.
   You may experience difficulties in effecting service of process, enforcing foreign judgments or
bringing original actions in China based on United States or other foreign laws against us or our
management.
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Anti-takeover provisions in our organizational documents may discourage our acquisition by a third
party, which could limit your opportunity to sell your shares at a premium.
  
    
    provisions that restrict the ability of our shareholders to call meetings and to propose
special matters for consideration at shareholder meetings; and
    
    provisions that authorize our board of directors, without action by our shareholders, to
issue preferred shares and to issue additional ordinary shares, including ordinary shares
represented by ADSs.
  The voting rights of holders of ADSs are limited by the terms of the deposit agreement.
  You may be subject to limitations on transfer of your ADSs.
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Your right as a holder of ADSs to participate in any future rights offerings may be limited, which
may cause dilution to your holdings.
  
 Item 4.
    
    Information on the Company
 A. HISTORY AND DEVELOPMENT OF THE COMPANY
     
    
    In July 2004, we acquired Hangzhou Bianfeng Networking Co., Ltd., or Hangzhou Bianfeng,
which operates an online chess and board games platform.
    
    In September 2004, we acquired Shanghai Xuanting Entertainment Information Technology
Co., Ltd., or Qidian, which operates qidian.com, an original online literature platform.
    
    In May 2005, we acquired Shanghai Haofang Online Information Technology Co. Ltd., or
Haofang, which operates a leading e-sports game platform in China.
    
    In November 2005, we acquired Wenzhou Chuangjia Technology Co., Ltd., or Gametea, which
operates an online chess and board games platform in China.
    
    In August 2007, we acquired 50% of the equity interest in Jinjiang Literature City, or
Jinjiang, which operates jjwxc.net, an original online literature platform.
  58




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
    
    In April 2008, we acquired 60% of the equity interest in hongxiu.com, or Hongxiu, which
operates an original online literature platform of the same name.
    
    In 2008, we commenced a reorganization. Specifically, we reorganized certain of our
content businesses into Shanda Games, which develops, sources and manages intellectual
property rights related to MMORPGs and advanced casual games; Cloudary Corporation
(formerly known as Shanda Literature Corporation), which operates online literature
platforms; and other online content businesses. In addition, we established Shanda Online,
which operates an integrated service platform.
    
    In September 2008, we issued US$175 million in aggregate principal amount of 2.0% senior
convertible notes due 2011, or the  Convertible Notes, pursuant to Rule144A under the
Securities Act. All of the proceeds from the issuance of the Convertible Notes were used to
repurchase our ADSs pursuant to an accelerated share repurchase program which we completed
in March 2009.
    
    In 2009, we established the Institute for Innovation and Technology, or IIT, to conduct
research on and develop new technology, products and services.
    
    In July 2009, we closed the tender offer of 52.6% of the outstanding shares of Hurray!
Holding, Co., Ltd., or Hurray Holding (NASDAQ: HRAY), whose businesses include artist
development, music production and offline distribution in China and distribution of music
and music-related products such as ringtones, ring-back tones, and true tones, to mobile
users in China through a wide range of WVAS platforms over mobile networks and through the
Internet. We subsequently purchased a certain number of Hurray Holding shares from certain
existing shareholders and through open market transactions.
    
    In September 2009, Shanda Games completed its initial public offering of its ADSs on the
NASDAQ Global Select Market.
    
    In November 2009, we and Hunan TV established a joint venture, which plans to produce
and distribute movies and television series, as well as engage in other related businesses
such as agency services.
    
    In January 2010, Hurray Holding acquired Ku6 Holding Limited, one of Chinas leading online
video portals.
    
    In January 2010, Shanda Games acquired Goldcool, a Shanghai based online game developer
and operator.
    
    In January 2010, Shanda Games acquired Mochi Media, a leading platform for
distributing and monetizing browser-based games worldwide.
    
    In August 2010, we and Hurray Holding completed a series of asset transactions. Hurray
Holding acquired 75% of an online audio business from us for a consideration of 415,384,615
newly issued ordinary shares of Hurray Holding and acquired the remaining 25% from a
minority shareholder for a consideration of 138,461,539 newly issued ordinary shares of
Hurray Holding. We acquired Hurray Holdings recorded music and WVAS businesses for an
aggregate consideration of US$37,243,904 in cash.
    
    In August 2010, Hurray Holding changed its name from Hurray! Holding Co., Ltd. to Ku6
Media Co., Ltd.
    
    In September 2010, Shanda Games established a joint venture with China Network
Television, a national online broadcaster in China.
    
    In September 2010, Shanda Games acquired Eyedentity Games, one of a leading online game
development studio in Korea.
    
    In September 2010, Shanda Games and Square Enix Co., Ltd. (Square Enix) announced a
strategic partnership. The partnership started with an exclusive license in mainland China
to FINAL FANTASY® XIV, an MMORPG and the latest installment of the FINAL FANTASY franchise.
  59




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
    
    In April 2011, we agreed to invest US$100,000,000 in Ku6 in the form of ordinary shares
and senior convertible bonds.
    
    In May 2011, Cloudary Corporation submitted a draft registration statement on Form F-1
to the SEC for a proposed initial public offering, subject to market condition.
    
    In May 2011, our wholly owned subsidiary, Shanghai Shengfutong Electronic Business Co.,
Ltd, received a payment business license for non-financial institutions issued by the
Peoples Bank of China.
  B. BUSINESS OVERVIEW
  
    
    Shanda Games. Shanda Games offers MMORPGs and advanced casual games. Shanda Games also
offers browser-based mini-casual games without user-end software through Mochi Media, Inc..
    
    Cloudary Corporation. Cloudary Corporation provides literature and other publications
offered through six original literature websites, wireless distribution and offline
publications to a diversified user base. Cloudary Corporation also licenses certain
copyrights of its proprietary literary content to gaming companies and TV and film studios.
    
    Shanda Casual Community. Shanda Casual Community and its subsidiaries operate a social
network game community, which includes online chess and board game platforms and e-sports
game platform as well as table game platform.
    
    Hurray. Hurray provides a wide range of WVAS to mobile users in China, including music,
games, ringtones, pictures and animation, community, and other media and entertainment
services. It is also engaged in artist development, music production and offline
distribution in mainland China and Taiwan through several affiliates.
    
    Ku6. Ku6 provides video information and entertainment services to viewers in China
through two online brands Ku6 and Ku6 Theatre, and two online video websites, ku6.com and
juchang.com. Its broad selection of online video content includes entertainment, sports,
finance, fashion, technology, automobile, education and others.
    
    Shanda Online. Shanda Online operates an integrated service platform which provides
distribution, payment, customer service and other e-commerce services for online
entertainment content.
    
    Shanda Institute for Innovation and Technology (Shanda IIT). Shanda IIT conducts
research and development in computer, portable devices, Internet, communications and other
related technologies.
 Shanda Games
    60




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VisualGame
    
    Genre
    
    Dimensions
    
    Game Source
    
    Launch DateMir II
    
    Martial arts adventure
    
    2D
    
    License(1)
    
    November 2001Woool(2)
    
    Martial arts adventure
    
    2D
    
    In-house
    
    October 2003The Sign
    
    Martial arts adventure
    
    3D
    
    In-house
    
    May 2004The Age
    
    Martial arts adventure
    
    2D
    
    In-house
    
    June 2004Magical Land
    
    Fantasy
    
    2D
    
    In-house
    
    July 2005R.O.
    
    Fantasy
    
    2D
    
    License
    
    September 2005Archlord
    
    Fantasy
    
    3D
    
    License
    
    July 2006Latale
    
    Side-scrolling combat
    
    2D
    
    In-house
    
    April 2007Fengyun Online
    
    Martial arts adventure
    
    3D
    
    Acquisition
    
    July 2007World Hegemony
    
    Strategy web game
    
    2D
    
    In-house
    
    November 2007Might & Hero
    
    Strategy web game
    
    2D
    
    Investment
    
    May 2008Lineage
    
    Fantasy
    
    2D
    
    License
    
    June 2008Lineage II
    
    Fantasy
    
    3D
    
    License
    
    June 2008Tales of Dragons
    
    Fantasy
    
    2D
    
    In-house
    
    July 2008A Thousand Years III
    
    Martial arts adventure
    
    2D
    
    In-house
    
    November 2008AION
    
    Fantasy
    
    3D
    
    License
    
    April 2009JX Online World
    
    Martial arts adventure
    
    2D
    
    Cooperation
    
    June 2009Ghost Fighter Online
    
    Side-scrolling action
    
    3D
    
    Investment
    
    August 2009Luvinia Online
    
    Fantasy
    
    3D
    
    Acquisition
    
    August 2009ZU Online
    
    Martial arts adventure
    
    3D
    
    Investment
    
    August 2009Yuyan Online
    
    Martial arts adventure
    
    2.5D(3)
    
    Cooperation
    
    September 2009TS2 Online
    
    Turn-based
    
    2D
    
    License
    
    December 2009Hades Realm
    
    Martial arts adventure
    
    2D
    
    Acquisition
    
    January 2010Zodiac Tales
    
    Turn-based
    
    2D
    
    Acquisition
    
    January 2010Dukes and Lords
    
    Martial arts adventure
    
    2D
    
    Acquisition
    
    January 2010Dragon Nest
    
    Action
    
    3D
    
    Acquisition
    
    July 2010JX3 Online
    
    Martial arts adventure
    
    3D
    
    Cooperation
    
    August 2010Hades Realm II
    
    Martial arts adventure
    
    3D
    
    Acquisition
    
    November 2010
 
 (1)
    
    Shanda Games licenses Mir II from Actoz, which is its majority-owned subsidiary. While Actoz
controls the licensing of Mir II in China, Shanda Games continues to classify Mir II as a
licensed game because Actoz shares a portion of the ongoing licensing fees Shanda Games pays
to Actoz with a third party that co-owns the intellectual property rights relating to the
game.(2)
    
    Including Woool: Legend of Heroes and Woool:Raider of Gems,which are the sequels to Wool(3)
    
    2.5D refers to a game with 3D-rendered characters but a 2D game environment.  61




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For the Three Months Ended,March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2010
    
    
    2010
    
    
    2010
    
    
    2010Quarterly active paying accounts (in thousands)(1)
    
    
    9,578
    
    
    
    9,608
    
    
    
    9,191
    
    
    
    9,464Average monthly revenues per active paying account (in
RMB)(2)
    
    
    35.0
    
    
    
    34.7
    
    
    
    35.2
    
    
    
    36.7
 
 (1)
    
    Quarterly active paying accounts refers to the aggregate number of active paying accounts for
Shanda Games MMORPGs operated in China during a given quarter.(2)
    
    Average monthly revenues per active paying account refers to Shanda Games revenues from the
operation of MMORPGs in China during a given quarter divided by quarterly active paying
accounts, further divided by three. Advanced Casual Games
  Game
    
    Genre
    
    Visual Dimensions
    
    Game Source
    
    LaunchBNB
    
    Battle
    
    2D
    
    License
    
    August 2003GetAmped
    
    Fighting
    
    3D
    
    License
    
    May 2004Maple Story
    
    Side-scrolling combat
    
    2D
    
    License
    
    August 2004Crazy Kart
    
    Racing
    
    3D
    
    In-house
    
    March 2006Kongfu Kids
    
    Fighting
    
    3D
    
    In-house
    
    June 2007Tales Runner
    
    Racing
    
    3D
    
    License
    
    July 2007
  For the Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2010
    
    
    2010
    
    
    2010
    
    
    2010Quarterly active paying accounts (in thousands)(1)
    
    
    1,075
    
    
    
    923
    
    
    
    834
    
    
    
    746Average monthly revenues per active paying account (in
RMB)(2)
    
    
    28.6
    
    
    
    25.3
    
    
    
    30.5
    
    
    
    27.7
 
 (1)
    
    Quarterly active paying accounts refers to the aggregate number of active paying accounts for
Shanda Games advanced casual games operated in China during a given quarter.(2)
    
    Average monthly revenues per active paying account refers to Shanda Games online game
revenues from the operation of advanced casual games in China during a given quarter divided
by quarterly active paying accounts, further divided by three.  62




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Cloudary Corporation
   Name
    
    HighlightsQidian.com
    
         Launched in 2002 and primarily attracts male readers between the ages of 19 and 35     Pioneered the paid reading model, which has become a standard practice in Chinas online literature industry     As of March 31, 2011, top 10 titles attracted in the aggregate approximately 622.0 million page views and 8.0 million comments
since they were first pasted     Well-known for fantasy novels. Also offers wuxia, sci-fi, history and military fictionReadnovel.com
    
         Launched in 2004 and primarily attracts readers below the age of 25     Well-known for literary works on subjects concerning campus lifeHongxiu.com
    
         Launched in 1999 and primarily attracts white-collar female readers
  63




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Name
    
    Highlights     One of its literary works, The Desolation of the Ancient Path at Yangguan, was selected as reading test material for Chinas
college entrance exam in 2008 and excerpted in Chinese textbooks for middle school students in Hong Kong published by Oxford University
Press     Well-known for romance, prose, poetry and short storiesXs8.cn
    
         Launched in 2005     Well-known for romance novels, and also offers horror and mystery fictionXxsy.net
    
         Launched in 2001 and primarily attracts female readers, especially housewives     Well-known for literary works on subjects concerning contemporary life and fantasyRongshuxia.com
    
         Launched in 1997 and is the literature website with the longest operating history in mainland China     Leading culture-driven online literature platform     Well-known for book reviews written by professional reviewers and famous authors
   Shanda Casual Community
  Hurray
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Ku6
   Shanda Online
     Shanda IIT
   65




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Competition
   zongheng.com 17k.com zhulang.com sina.com sohu.com qq.com
        66




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Intellectual Property and Proprietary Rights
  snda.com sdo.com shandagames.com
    Regulatory Matters
  
    
    the Ministry of Industry and Information Technology, or the MIIT;
    
    the Ministry of Culture, or the MOC;
    
    the General Administration of Press and Publication, or the GAPP;
    
    the State Copyright Bureau, or the SCB;
    
    the State Administration for Industry and Commerce, or the SAIC;
    
    the State Administration of Radio, Film and Television, or the SARFT;
    
    the Ministry of Commerce, or the MOFCOM;
    
    the State Council Information Office;
    
    the Peoples Bank of China;
    
    the Ministry of Public Security; and
    
    the Bureau of State Secrecy, or the SSB.
  67




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Regulation of Foreign Ownership Restriction in Value Added Telecommunications Industry
 Guidance
Catalogue of Industries for Foreign Investment
 Regulations on Administration of
Foreign-invested Telecommunication Enterprises
 Circular on Strengthening the Administration of Foreign
Investment in Value-added Telecommunication Services
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Regulation of Telecommunications and Internet Information Services
  PRC Telecommunications Regulations Notice on Adjusting the Catalog of
Telecommunication Business
 Administrative Measures on Internet
Information Services
 Administrative Measures on
Telecommunications Business Operating License
 Regulation of Internet Content, Information Security and Censorship
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Import Regulation
  Regulation of Offline Publishing Channels and Distribution
   Regulation of Internet Publication
    70




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Regulation of Online Transmission of Audiovisual Programs
 Rules for the Administration of Transmission of
Audiovisual Programs Through Internet and Other Information Networks
  Regulation of Online Cultural Activities
  Regulation of Advertising
    71




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Regulation of Intellectual Property Rights
 Agreement on Trade Related Aspects of
Intellectual Property Rights
 Copyright. Copyright Law Trial
Measures of Voluntary Registration of Works
  Trademark
   72




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Patent
  Software Copyright. Regulations on Computer Software Protection
  Domain Name Implementing Rules for Domain Name
Registration
  73




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Regulation of Music Production
   Certification and Licensing System
   Regulation of Artist Agency
  Regulations on Software Products
 Administrative Measures on Software Products
  74




---



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Regulations on Internet Medical and Health Information Services
  Regulations on Internet Cafe Regulation
  Regulations on Privacy Protection
  Regulations on Antifatigue Compliance System and Real-name Registration System
     75




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Regulations on Payment and Clearance by Non-financial Institutions
   Regulations on Virtual Currency
      76




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C. ORGANIZATIONAL STRUCTURE
  
    
    Shanda Games operates its business in China through Shanghai Shulong, whose nominee
shareholders are PRC citizens, and its subsidiaries.
    
    We operate our literatary content business in China through Hongwen, whose nominee
shareholders are PRC citizens, and its subsidiaries.
    
    We operate our integrated service platform through Shanda Networking and Shengzhan
entities whose nominee shareholders are PRC citizens.
    
    We operate our online video business in China through Beijing Ku6, whose nominee
shareholders are PRC citizens, and its subsidiaries.
    
    We operate our WVAS business in China through the Hurray! Solutions, whose nominee
shareholders are PRC citizens, and its subsidiaries.
    
    We operate our social network game community through Hangzhou Bianfeng, whose nominee
shareholders are PRC citizens, and its subsidiaries.
    77




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(1)
    
    See definitions in the Introduction part. D. PROPERTY, PLANTS AND EQUIPMENT
      78




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Item 4A.
    
    Unresolved Staff Comments
  
 Item 5.
    
    Operating and Financial Review and Prospects
 You should read the following discussion and analysis of our financial condition and results
of operations in conjunction with our consolidated financial statements and the related notes
included elsewhere in this annual report on Form 20-F . This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results
may differ materially from those anticipated in these forward-looking statements as a result of
various factors, including those set forth under Item 3D. Risk Factors or in other parts of this
annual report on Form 20-F .
 Overview
  
    
    Shanda Games. Shanda Games offers MMORPGs and advanced casual games. Shanda Games also
offers browser-based mini-casual games without user-end software through
Mochi Media, Inc.
    
    Cloudary Corporation. Cloudary Corporation provides literature and other publications
offered through its six original literature websites, wireless distribution and offline
publications to a diversified user base. Cloudary Corporation also licenses certain
copyrights of its proprietary literary content to gaming companies and TV and film
studios.
    
    Shanda Casual Community. Shanda Casual Community and its subsidiaries operate a social
network game community, which includes online chess and board game platforms and e-sports
game platform as well as table game platform.
    
    Hurray. Hurray provides a wide range of WVAS to mobile users in China, including music,
games, ringtones, pictures and animation, community and other media and entertainment
services. It is also engaged in artist development, music production and offline
distribution in mainland China and Taiwan through several affiliates.
    
    Ku6. Ku6 provides video information and entertainment services to viewers in China
through two online brands Ku6 and Ku6 Theatre, and two online video websites, ku6.com and
juchang.com. Its broad selection of online video content includes entertainment, sports,
finance, fashion, technology, automobile, education and others.
    
    Shanda Online. Shanda Online operates an integrated service platform that provides
distribution, payment, customer service and other e-commerce services for online
entertainment content.
    
    Shanda IIT. Shanda IIT conducts technology research and development in computer, portable devices,
Internet, communications and other related technologies.
  79




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Factors Affecting Results of Operations
  
    
    our ability to maintain and expand our user base and convert registered users to paying
users;
    
    the continued improvement of existing services and introduction of additional services
that Shanda Online offers on its integrated service platform;
    
    the willingness of content providers to offer their content through and the
receptiveness of content providers to the services offered by Shanda Onlines integrated
service platform;
    
    the discounts offered for sales of our prepaid cards;
    
    the ability to offer popular new online games and expansion packs for existing games,
literary content and other interactive entertainment content;
    
    the growth of the WVAS market in China and the ability to maintain good relationships
with the telecommunications operators and to position related services on the WAP portals
of the telecommunications operators;
    
    the ability to develop recording artists, sustain a pipeline of new song releases and
keep up with consumer music tastes;
    
    the ability to attract advertisers and generate other revenues to offset the costs of
acquiring copyrighted content;
    
    the cost of researching, developing and marketing new products and content;
    
    the future availability of preferential tax treatments and government financial
incentives in China;
    
    results of operations of the acquired companies and/or their consolidation in our
financial statements;
    
    the arrival of additional competitors into the markets of each of our businesses;
    
    our ability to successfully grow through the identification and acquisition of
complementary businesses on terms acceptable to us and our ability to successfully
integrate acquired companies and realize synergies envisioned at the time of acquisition;
    
    the effect of PRC regulations on the conduct of our operations; and
    
    the growth of Internet and personal computer use and the popularity of these media as a
source of entertainment.
 A. OPERATING RESULTS
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
    
    Shanda Games, which develops, sources and manages intellectual property rights relating
to MMORPGs and advanced casual games and mini-casual games without user-end software;
    
    Shanda Online, which operates an integrated service platform that provides distribution,
payment, customer service and other e-commerce services for online entertainment content;
    
    Ku6, which provides video information and entertainment services to viewers in China
through two online brands Ku6 and Ku6 Theatre, and two online video websites, ku6.com and
juchang.com; and
    
    Other, which includes businesses involved in the literature business, the social network
game community, the recorded music business, WVAS, the provision of management software to
Internet cafes, etc.
 Structure of Our Business Prior to the Reorganization
  Description of the Separation and Related Key Agreements
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Selected Financial Information Regarding Business Segments
  Year Ended December 31, 2010Shanda Games
    
    
    Shanda Online
    
    
    Ku6
    
    
    Others
    
    
    Elimination
    
    
    Total(RMB in millions)Net revenues
    
    
    4,504.7
    
    
    
    1,024.4
    
    
    
    109.3
    
    
    
    1,029.7
    
    
    
    (1,095.9
    )
    
    
    5,572.2Costs of revenues
    
    
    (1,837.2
    )
    
    
    (229.4
    )
    
    
    (267.0
    )
    
    
    (685.4
    )
    
    
    865.5
    
    
    
    (2,153.5
    )Gross profit
    
    
    2,667.5
    
    
    
    795.0
    
    
    
    (157.7
    )
    
    
    344.3
    
    
    
    (230.4
    )
    
    
    3,418.7
 Year Ended December 31, 2009Shanda Games
    
    
    Shanda Online
    
    
    Others
    
    
    Elimination
    
    
    Total(RMB in millions)Net revenues
    
    
    4,806.7
    
    
    
    1,066.1
    
    
    
    519.1
    
    
    
    (1,156.5
    )
    
    
    5,235.4Costs of revenues
    
    
    (1,933.5
    )
    
    
    (203.2
    )
    
    
    (291.3
    )
    
    
    950.4
    
    
    
    (1,477.6
    )Gross profit
    
    
    2,873.2
    
    
    
    862.9
    
    
    
    227.8
    
    
    
    (206.1
    )
    
    
    3,757.8
 Year Ended December 31, 2008Shanda Games
    
    
    Shanda Online
    
    
    Others
    
    
    Elimination
    
    
    Total(RMB in millions)Net revenues
    
    
    3,376.8
    
    
    
    784.1
    (1)
    
    
    268.2
    
    
    
    (860.0
    )
    
    
    3,569.1Costs of revenues
    
    
    (1,489.4
    )
    
    
    (126.0
    )
    
    
    (171.9
    )
    
    
    766.8
    
    
    
    (1,020.5
    )Gross profit
    
    
    1,887.4
    
    
    
    658.1
    
    
    
    96.3
    
    
    
    (93.2
    )
    
    
    2,548.6
 
 (1)
    
    Represents fees for certain technical services as calculated pursuant to contractual
agreements entered into both prior to and in connection with the Separation. Therefore, net
revenues in 2008 were calculated using these methods of calculating prior to and after the
Separation, and net revenues for the years ended December 31, 2008, 2009 and 2010 may not be
comparable. Net Revenues
 Shanda Games
   For the Years Ended December 31,2008
    
    
    2009
    
    
    2010% of Net
    
    
    
    
    
    
    % of Net
    
    
    
    
    
    
    % of NetRMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues(in millions, except percentages)Net revenues:MMORPGs revenues(1)
    
    
    2,948.5
    
    
    
    87.3
    %
    
    
    4,422.1
    
    
    
    92.0
    %
    
    
    4,018.3
    
    
    
    89.2
    %Advanced casual game revenues(2)
    
    
    355.8
    
    
    
    10.5
    %
    
    
    305.6
    
    
    
    6.4
    %
    
    
    300.6
    
    
    
    6.7
    %Other revenues (3)
    
    
    72.5
    
    
    
    2.2
    %
    
    
    79.0
    
    
    
    1.6
    %
    
    
    185.8
    
    
    
    4.1
    %Total net revenues
    
    
    3,376.8
    
    
    
    100.0
    %
    
    
    4,806.7
    
    
    
    100.0
    %
    
    
    4,504.7
    
    
    
    100.0
    %
 
 (1)
    
    Represents net revenues generated from the operation of MMORPGs in China.(2)
    
    Represents net revenues generated from the operation of advanced casual games in China.(3)
    
    Represents net revenues generated primarily outside of China from game licensing, game
operations, and advertising.  82




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83




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Shanda Online
     Ku6
  Others
  
    
    operation and management of online literary content (i) by charging users for viewing
paid content on literature websites and using community tools; (ii) through revenue-sharing
agreements with other distribution channel providers, including e-readers and wireless
carriers; and (iii) by licensing certain content rights;
    
    operation and management of offline publishing businesses by selling books through chain
and online bookstores and wholesalers;
    
    operation of the social network game community via users virtual item consumption as
well as VIP membership fees;
    
    operation and management of recording artist development, music production, offline
distribution and events organization;
    
    operation of WVAS by providing personalized media, games, entertainment and
communication services to mobile phone customers;
    
    the provision of management software to Internet cafes via charging, on a monthly basis,
a fixed rate per each 100 computers that install our management software;
    
    advertising, sponsorship or a combination of both for our other businesses; and
    
    sales of Bambook, Shanda IITs proprietary e-reader product
  84




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Cost of revenues
 Shanda Games
  For the Years Ended December 31,2008
    
    
    2009
    
    
    2010% of Net
    
    
    
    
    
    
    % of Net
    
    
    
    
    
    
    % of NetRMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues(in millions, except percentages)Net revenues of Shanda Games
    
    
    3,376.8
    
    
    
    100.0
    %
    
    
    4,806.7
    
    
    
    100.0
    %
    
    
    4,504.7
    
    
    
    100.0
    %Cost of revenues:Platform fees
    
    
    864.9
    
    
    
    25.6
    %
    
    
    1,018.5
    
    
    
    21.2
    %
    
    
    909.8
    
    
    
    20.2
    %Upfront and ongoing licensing fees
    
    
    520.9
    
    
    
    15.4
    %
    
    
    797.1
    
    
    
    16.6
    %
    
    
    730.3
    
    
    
    16.2
    %Others
    
    
    103.6
    
    
    
    3.1
    %
    
    
    117.9
    
    
    
    2.4
    %
    
    
    197.1
    
    
    
    4.4
    %Total cost of revenues
    
    
    1,489.4
    
    
    
    44.1
    %
    
    
    1,933.5
    
    
    
    40.2
    %
    
    
    1,837.2
    
    
    
    40.8
    %Gross profit/margin
    
    
    1,887.4
    
    
    
    55.9
    %
    
    
    2,873.2
    
    
    
    59.8
    %
    
    
    2,667.5
    
    
    
    59.2
    %
 Platform fees.
 Upfront and ongoing licensing fees.
 Others.
  85




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Shanda Online
   Ku6
  Internet bandwidth costs.
 Amortization and write-downs of licensed video copyrights.
 Payroll costs.
 In-house developed content costs.
 Depreciation of servers and other equipment.
 Others
  Elimination
   86




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Operating Expenses
  For the Years Ended December 31,2008
    
    
    2009
    
    
    2010% of Net
    
    
    
    
    
    
    % of Net
    
    
    
    
    
    
    % of NetRMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues
    
    
    RMB
    
    
    Revenues(in millions, except percentages)Net revenues
    
    
    3,569.1
    
    
    
    100.0
    %
    
    
    5,235.4
    
    
    
    100.0
    %
    
    
    5,572.2
    
    
    
    100.0
    %Operating expenses:Product development
    
    
    274.6
    
    
    
    7.7
    %
    
    
    417.3
    
    
    
    8.0
    %
    
    
    683.4
    
    
    
    12.3
    %Sales and marketing
    
    
    318.0
    
    
    
    8.9
    %
    
    
    516.9
    
    
    
    9.9
    %
    
    
    771.6
    
    
    
    13.8
    %General and administrative
    
    
    513.7
    
    
    
    14.4
    %
    
    
    779.2
    
    
    
    14.9
    %
    
    
    1,112.9
    
    
    
    20.0
    %Total operating expenses
    
    
    1,106.3
    
    
    
    31.0
    %
    
    
    1,713.4
    
    
    
    32.7
    %
    
    
    2,567.9
    
    
    
    46.1
    %Operating profit/margin
    
    
    1,442.3
    
    
    
    40.4
    %
    
    
    2,044.4
    
    
    
    39.0
    %
    
    
    850.8
    
    
    
    15.3
    %
 Product development expenses.
 Sales and marketing expenses.
 General and administrative expenses.
  87




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Other income, net
   
    
    generating more than a minimum level of revenues from high technology related sales or
services, determined as a percentage of total revenues;
    
    employing more than a minimum number of employees in product development; and
    
    expending more than a minimum amount on product development, determined as a percentage
of total revenues.
  Taxation
  PRC Enterprise Income Tax
     88




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Equity in Losses of Affiliated Companies
  Income (loss) from discontinued operations, net of tax
  Non-Controlling Interest and Redeemable Preferred Shares Issued by a Subsidiary
   89




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Critical Accounting Policies
  Revenue Recognition
    90




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91




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Consolidation of Variable Interest Entities
   Shanda Games.
  92




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Shanda Online.
 Others.
 Inventory
  Property and Equipment, Intangible Assets, Long-term Prepayments and Other Long-lived Assets
    93




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Impairment of Investment in Affiliated Companies
  Impairment of Goodwill
   Allowances for Doubtful Accounts
  Share-Based Compensation
    94




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(1) Shanda Interactive Entertainment Limited
 2003 Share Incentive Plan
   2005 Equity Compensation Plan
   (2) Shanda Games
   95




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(3) Ku6
   (4) Cloudary Corporation
  Income Taxes and Valuation Allowance
   96




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Contingencies
   Results of Operations
 Basis of preparation.
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Net revenues.
   97




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Cost of revenues.
     Gross profit.
  98




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Operating expenses.
 
    
    Our product development expenses increased 63.8% from RMB417.3 million in 2009 to
RMB683.4 million (US$103.5 million) in 2010, primarily due to (i) an increase of RMB180.3
million in salary and benefits expenses due to the increase in the headcount of research
and development employees; (ii) an increase of RMB31.0 million in share-based compensation
as a result of Shanda Games restricted shares granted to its product development staff;
and (iii) an increase of RMB10.6 million in depreciation of property, equipment and
software and rental and management fees due to business expansion. Product development
expenses totaled approximately 8.0% and 12.3% of our net revenues in 2009 and 2010,
respectively.
    
    Our sales and marketing expenses increased 49.3% from RMB516.9 million in 2009 to
RMB771.6 million (US$116.9 million) in 2010, primarily due to (i) an increase of RMB124.7
million in salary and benefits expenses, mainly due to the increase in the headcount of
sales and marketing employees; (ii) an increase of RMB56.3 million in marketing and
promotion expenses; (iii) an increase of RMB22.7 million in office expenses, travelling
expenses and rental and management expenses in connection with our business expansion; and
(iv) an increase in amortization of intangible assets arising from the acquisition of
certain companies. Sales and marketing expenses totaled approximately 9.9% and 13.8% of our
net revenues in 2009 and 2010, respectively.
    
    Our general and administrative expenses increased 42.8% from RMB779.2 million in 2009 to
RMB1,112.9 million (US$168.6 million) in 2010 primarily due to (i) an increase of RMB151.0
million in salary and benefits expenses, mainly due to an increase in experienced hires
engaged in general and administrative work; (ii) an increase of RMB53.9 million in rental
and management expenses in connection with our business expansion; (iii) an increase of
RMB27.3 million in depreciation of property, equipment and software; (iv) an increase of
RMB25.3 million in office and traveling expenses; (v) an increase of RMB22.7 million in
amortization of intangible assets, mainly related to acquisition of certain companies; (vi)
an increase of RMB19.1 million in bad debt provisions related to receivables from online
advertising services and (vii) an increase of RMB16.5 million in consulting, legal and
audit fees arising from investments and business acquisitions, which was offset by the
decrease in business taxes in 2010, primarily due to the decreased volume of services which
our PRC subsidiaries provided and the decrease in revenues collected from our PRC operating
companies. General and administrative expenses accounted for approximately 14.9% and 20.0%
of our net revenues in 2009 and 2010, respectively.
 Operating income from continuing operations.
  99




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Income before income tax expenses from continuing operations.
 
    
    Interest income.Interest income increased from RMB71.1 million in 2009 to RMB144.5
million (US$21.9 million) in 2010, primarily due to the increase in bank balances due to
the net proceeds received from Shanda Games IPO in September 2009 and the better
performance of treasury operations in 2010;
    
    Investment income.We had investment income of RMB42.5 million in 2009 and RMB3.7
million (US$0.6 million) in 2010. The lower investment income in 2010 primarily related to
higher gains from the investments in marketable securities in 2009; and
    
    Other income.Our other income increased from RMB203.6 million in 2009 to RMB254.8
million (US$38.6 million) in 2010. Our other income in 2010 was primarily comprised of
government financial incentives of RMB272.9 million (US$41.4 million), compared with
RMB221.9 million in 2009.
 Income tax expenses.
 Equity in losses of affiliated companies.
 Income from continuing operations, net of tax
 Loss/income from discontinued operations, net of tax.
 Net income attributed to non-controlling interests and redeemable preferred shares issued by a
subsidiary
 Net income attributed to Shanda Interactive.
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Net revenues.
   100




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Cost of revenues.
    Gross profit.
     101




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Operating expenses.
 
    
    Our product development expenses increased 51.9% from RMB274.6 million in 2008 to
RMB417.3 million in 2009, primarily due to (i) an increase of RMB82.6 million in salary and
benefits expenses in connection with the increased headcount of research and development
employees; (ii) an increase of RMB43.0 million in outsourced product development costs as a
result of our investments through Shanda Games 18 Capital investment fund; and (iii) the
consolidation of the financial results of recorded music and WVAS businesses beginning in
September 2009. Product development expenses totaled approximately 7.7% and 8.0% of our net
revenues in 2008 and 2009, respectively.
    
    Our sales and marketing expenses increased 62.6% from RMB318.0 million in 2008 to
RMB516.9 million in 2009, primarily because of (i) an increase of RMB160.2 million in our
marketing and promotion expenses; and (ii) an increase of RMB31.7 million in salary and
benefits expenses arising from the increased headcount of sales and marketing employees.
Sales and marketing expenses totaled approximately 8.9% and 9.9% of our net revenues in
2008 and 2009, respectively.
    
    Our general and administrative expenses increased 51.7% from RMB513.7 million in 2008 to
RMB779.2 million in 2009, primarily because of: (i) an increase of RMB112.5 million in
share-based compensation costs, mainly because of the launch of a new employee incentive
plan by Shanda Games in 2009; (ii) an increase of RMB68.9 million in salary and benefits
expenses, because of the increased headcount of general and administrative staff in
connection with our business expansion; (iii) an increase of RMB21.4 million in
depreciation of property, equipment and software and purchase of land use rights; (iv) an
increase of RMB16.2 million in business taxes in 2009, primarily because of the increased
number of intercompany transactions as a result of the Reorganization, the increased volume
of services which our PRC subsidiaries provided and revenue collected from our PRC
operating companies; (v) an increase of RMB14.2 million in consulting, legal and audit
fees, primarily for Shanda Games initial public offering in 2009 and business
acquisitions; (vi) an increase of RMB10.9 million in rental and management fees; and (vii)
an increase in other general and administrative expenses, which primarily related to office
expenses and traveling expenses. General and administrative expenses accounted for
approximately 14.4% and 14.9% of our net revenues in 2008 and 2009, respectively.
 Operating income from continuing operations.
 Income before income tax expenses from continuing operations.
 
    
    Interest expenses.Interest expenses increased from RMB30.0 million in 2008 to RMB100.7
million in 2009, primarily because of the amortization of the debt issuance cost and the
accrual of the interest expense of 2.0% Convertible Senior Notes due 2011 with effective
interest method;
    
    Investment income.We had investment income of RMB8.2 million in 2008 and investment
income of RMB42.5 million in 2009. The higher investment income in 2009 primarily related
to gains from the investments in marketable securities; and
    
    Other income.Our other income increased from RMB29.4 million in 2008 to RMB203.6
million in 2009. Our other income in 2009 primarily consisted of government financial
incentives of RMB221.9 million, compared to RMB62.3 million in 2008.
 Income tax expenses.
  102




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Equity in losses of affiliated companies.
 Income from continuing operations, net of tax.
 Losses from discontinued operations, net of tax.
 Net income attributed to non-controlling interests and redeemable preferred shares issued by a
subsidiary.
 Net income attributed to Shanda Interactive.
 B. LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows and Working Capital
   For the years ended December 31,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Net cash provided by operating activities
    
    
    1,745,883.3
    
    
    
    2,496,798.7
    
    
    
    1,669,144.6
    
    
    
    252,900.8Net cash used in investing activities
    
    
    (388,731.6
    )
    
    
    (2,350,612.4
    )
    
    
    (2,618,853.6
    )
    
    
    (396,796.0
    )Net cash (used in)/provided by financing
activities
    
    
    128,722.0
    
    
    
    7,407,287.6
    
    
    
    (4,343,252.1
    )
    
    
    (658,068.5
    )Effect of exchange rate change on cash
    
    
    (73,330.8
    )
    
    
    7,994.4
    
    
    
    (116,192.1
    )
    
    
    (17,604.9
    )Net increase in cash and cash equivalents
    
    
    1,412,542.9
    
    
    
    7,561,468.3
    
    
    
    (5,409,153.2
    )
    
    
    (819,568.6
    )Cash, beginning of period
    
    
    1,985,301.5
    
    
    
    3,397,844.4
    
    
    
    10,959,312.8
    
    
    
    1,660,501.9Cash, end of period
    
    
    3,397,844.4
    
    
    
    10,959,312.7
    
    
    
    5,550,159.6
    
    
    
    840,933.3
  103




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Net Cash Provided by Operating Activities
   Net Cash Used in Investing Activities
   Net Cash (Used in)/Provided by Financing Activities
   104




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Restrictions on Cash Transfers to the Company
      Capital Expenditures
   105




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##### Table of Contents



C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
   
    
    outsourcing and in-house development of updates, expansions and sequels of our existing
online game related content;
    
    sourcing new games via co-development, investment and in-house development;
    
    improving, via internal and outsourcing research and development, our integrated service
platform, including our digital content delivery system, unified billing and payment
system, customer relationship management system, and user authentication system and related
security;
    
    improving our server management and control systems;
    
    maintaining our internal billing and transmission records related to wireless
value-added services; and
    
    future development of IIT.
  D. TREND INFORMATION
  E. OFF-BALANCE SHEET ARRANGEMENTS
    106




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F. CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
  Payments Due by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    YearsOperating lease obligations:Office premises
    
    
    202.4
    
    
    
    92.3
    
    
    
    110.0
    
    
    
    0.1
    
    
    
    Computer equipment and others
    
    
    109.8
    
    
    
    108.6
    
    
    
    1.2
    
    
    
    
    
    
    
    Purchase of property and equipment and
intangible asset obligations
    
    
    626.8
    
    
    
    626.1
    
    
    
    0.7
    
    
    
    
    
    
    
    Convertible debt principal
    
    
    1,100.8
    
    
    
    1,100.8
    
    
    
    
    
    
    
    
    
    
    
    Convertible debt related interest expense(1)
    
    
    16.5
    
    
    
    16.5
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    2,056.3
    
    
    
    1,944.3
    
    
    
    111.9
    
    
    
    0.1
    
    
    
    
 
 (1)
    
    2.0% Convertible Senior Notes due 2011 bear interest at a fixed rate of 2.0% per annum.      
 Item 6.
    
    Directors, Senior Management and Employees
 A. DIRECTORS AND SENIOR MANAGEMENT
  Name
    
    Age
    
    
    PositionTianqiao Chen(1)
    
    
    37
    
    
    Chairman of the Board, Chief Executive Officer and PresidentQunzhao Tan
    
    
    35
    
    
    Non-executive DirectorDanian Chen
    
    
    32
    
    
    Director, Chief Operating OfficerQianqian Luo(1)
    
    
    34
    
    
    Non-executive DirectorJingsheng Huang(2)
    
    
    53
    
    
    Independent DirectorChengyu Xiong(2)
    
    
    56
    
    
    Independent DirectorZhao Kai(2)
    
    
    66
    
    
    Independent DirectorGrace Wu
    
    
    40
    
    
    Chief Financial Officer, DirectorJohn Lee
    
    
    58
    
    
    Head of TaxJin Zhang
    
    
    37
    
    
    Vice PresidentHaifa Zhu
    
    
    38
    
    
    Chief Investment OfficerDanning Mi
    
    
    42
    
    
    Chief Information Officer
 
 (1)
    
    Member of the compensation committee.(2)
    
    Member of the audit committee.  107




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Tianqiao Chen
 Qunzhao Tan
 Danian Chen
 Qianqian Luo
 Jingsheng Huang
 Chengyu Xiong
 Kai Zhao
  108




---



##### Table of Contents



Grace Wu
 John Lee
 Jin Zhang
 Haifa Zhu
 Danning Mi
 Duties of Directors
   
    
    convening shareholders meetings and reporting its work to shareholders at such
meetings;
    
    implementing shareholders resolutions;
    
    determining our business plans and investment proposals;
  109




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
    
    formulating our profit distribution plans and loss recovery plans;
    
    determining our debt and finance policies and proposals for the increase or decrease in
our registered capital and the issuance of debentures;
    
    formulating our major acquisition and disposition plans, and plans for merger, division
or dissolution;
    
    proposing amendments to our amended and restated memorandum and articles of association;
and
    
    exercising any other powers conferred by the shareholders meetings or under our amended
and restated memorandum and articles of association.
 Terms of Directors and Executive Officers
  B. COMPENSATION
  Equity Compensation Plans
    2008
    
    
    2009
    
    
    2010Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageOptions
    
    
    Exercise Prise
    
    
    Options
    
    
    Exercise Prise
    
    
    Options
    
    
    Exercise PriseOutstanding
    
    
    (US$)
    
    
    Outstanding
    
    
    (US$)
    
    
    Outstanding
    
    
    (US$)Outstanding at beginning of year
    
    
    5,257,841
    
    
    
    7.68
    
    
    
    4,018,513
    
    
    
    8.48
    
    
    
    2,558,176
    
    
    
    8.78Granted
    
    
    110,000
    
    
    
    15.65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (1,227,728
    )
    
    
    4.97
    
    
    
    (1,390,333
    )
    
    
    7.61
    
    
    
    (673,952
    )
    
    
    8.50Forfeited
    
    
    (120,850
    )
    
    
    15.89
    
    
    
    (70,004
    )
    
    
    14.72
    
    
    
    (15,000
    )
    
    
    8.45Expired
    
    
    (750
    )
    
    
    15.55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    4,018,513
    
    
    
    8.48
    
    
    
    2,558,176
    
    
    
    8.78
    
    
    
    1,869,224
    
    
    
    8.88Vested and exercisable at end of year
    
    
    1,838,647
    
    
    
    6.92
    
    
    
    1,446,927
    
    
    
    8.01
    
    
    
    1,639,225
    
    
    
    8.16
  110




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Options outstanding at December 13, 2010
    
    
    Options exerciable atWeighted
    
    
    
    
    
    
    December 31, 2010Average
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise Price
    
    
    Number
    
    
    Exercise Price(US$)
    
    Outstanding
    
    
    Life (years)
    
    
    (US$)
    
    
    Outstanding
    
    
    (US$)1.516
    
    
    329,831
    
    
    
    2.25
    
    
    
    1.516
    
    
    
    329.831
    
    
    
    1.5165.50
    
    
    26,899
    
    
    
    3.25
    
    
    
    5.50
    
    
    
    26,899
    
    
    
    5.506.8505
    
    
    804,786
    
    
    
    5.50
    
    
    
    6.8505
    
    
    
    804,786
    
    
    
    6.85058.00
    
    
    24,050
    
    
    
    3.57
    
    
    
    8.00
    
    
    
    24,050
    
    
    
    8.0011.6406
    
    
    321,600
    
    
    
    2.31
    
    
    
    11.6406
    
    
    
    175,351
    
    
    
    11.640615.02
    
    
    9,600
    
    
    
    3.48
    
    
    
    15.02
    
    
    
    4,600
    
    
    
    15.0215.55
    
    
    42,800
    
    
    
    4.08
    
    
    
    15.55
    
    
    
    42,800
    
    
    
    15.5516.86
    
    
    19,658
    
    
    
    4.58
    
    
    
    16.86
    
    
    
    19,658
    
    
    
    16.8617.60
    
    
    15,000
    
    
    
    3.01
    
    
    
    17.60
    
    
    
    5,000
    
    
    
    17.6018.0287
    
    
    100,000
    
    
    
    2.77
    
    
    
    18.0287
    
    
    
    75,000
    
    
    
    18.028718.64
    
    
    100,000
    
    
    
    2.79
    
    
    
    18.64
    
    
    
    75,000
    
    
    
    18.6419.09
    
    
    75,000
    
    
    
    2.83
    
    
    
    19.09
    
    
    
    56,250
    
    
    
    19.09Total:
    
    
    1,869,224
    
    
    
    
    
    
    
    
    
    
    
    1,639,225
   Number ofShares
    
    
    Per ShareUnderlying
    
    
    ExerciseOptions
    
    
    PriceName
    
    Granted
    
    
    (in US$)
    
    
    Date of Grant
    
    Date of ExpirationTianqiao Chen
    
    
    266,198
    
    
    
    1.516
    
    
    March 31, 2003
    
    March 31, 2013Danian Chen
    
    
    266,198
    
    
    
    1.516
    
    
    March 31, 2003
    
    March 31, 2013Qianqian Luo
    
    
    266,198
    
    
    
    1.516
    
    
    March 31, 2003
    
    March 31, 2013Jingsheng Huang
    
    
    *
    
    
    
    1.516
    
    
    March 31, 2003
    
    March 31, 2013Qunzhao Tan
    
    
    2,129,581
    
    
    
    1.516
    
    
    March 31, 2003
    
    March 31, 2013Qunzhao Tan
    
    
    150,000
    
    
    
    6.8505
    
    
    June 28, 2006
    
    June 28, 2016Grace Wu
    
    
    *
    
    
    
    18.0287
    
    
    October 8, 2007
    
    October 8, 2013Haifa Zhu
    
    
    *
    
    
    
    5.5
    
    
    March 1, 2004
    
    March 1, 2014Haifa Zhu
    
    
    *
    
    
    
    15.55
    
    
    January 28, 2005
    
    January 28, 2015Haifa Zhu
    
    
    *
    
    
    
    6.8505
    
    
    June 28, 2006
    
    June 28, 2016Haifa Zhu
    
    
    *
    
    
    
    11.6406
    
    
    March 24, 2007
    
    March 24, 2013Danning Mi
    
    
    *
    
    
    
    16.86
    
    
    August 1, 2005
    
    August 1, 2015Danning Mi
    
    
    *
    
    
    
    6.8505
    
    
    June 28, 2006
    
    June 28, 2016
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1% of our outstanding
ordinary shares.  111




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Number ofClass AOrdinary Sharesof ShandaGames to be
    
    
    Per ShareIssued Upon
    
    
    ExerciseExercise of
    
    
    PriceName
    
    Options
    
    
    (in US$)
    
    
    Date of Grant
    
    Date of ExpirationQunzhao Tan
    
    
    *
    
    
    
    3.40
    
    
    March 19, 2010
    
    March 19, 2020*
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019Danian Chen
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019Jingsheng Huang
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019Chengyu Xiong
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019Zhao Kai
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019Grace Wu
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019John Lee
    
    
    *
    (1)
    
    
    
    
    
    October 1, 2010
    
    October 1, 2020Jin Zhang
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019Haifa Zhu
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019Danning Mi
    
    
    *
    (1)
    
    
    
    
    
    September 7, 2009
    
    September 7, 2019
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1% of Shanda Games
outstanding ordinary shares.(1)
    
    Restricted shares.    112




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##### Table of Contents



Number ofShares
    
    
    Per ShareUnderlying
    
    
    ExerciseOptions
    
    
    PriceName
    
    Granted
    
    
    (in US$)
    
    
    Date of Grant
    

    Date of ExpirationQunzhao Tan
    
    
    *
    
    
    
    1.8
    
    
    January 27, 2011
    
    January 27, 2017Grace Wu
    
    
    *
    
    
    
    1.8
    
    
    January 27, 2011
    
    January 27, 2017John Lee
    
    
    *
    
    
    
    1.8
    
    
    January 27, 2011
    
    January 27, 2017Jin Zhang
    
    
    *
    
    
    
    1.8
    
    
    January 27, 2011
    
    January 27, 2017Haifa Zhu
    
    
    *
    
    
    
    1.8
    
    
    January 27, 2011
    
    January 27, 2017Danning Mi
    
    
    *
    
    
    
    1.8
    
    
    January 27, 2011
    
    January 27, 2017
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1% of Cloudary
Corporations outstanding ordinary shares.  C. BOARD PRACTICES
 Term and Severance Provisions of Directors and Executive Officers
   Board Committees
  Audit Committee
   
    
    selecting the independent auditors and preapproving all auditing and nonauditing
services permitted to be performed by the independent auditors;
    
    annually reviewing an independent auditors report describing the auditing firms
internal quality-control procedures, any material issues raised by the most recent internal
quality-control review, or peer review, of the independent auditors and all relationships
between the independent auditors and our company;
    
    setting clear hiring policies for employees or former employees of the independent
auditors;
    
    reviewing with the independent auditors any audit problems or difficulties and
managements response;
    
    reviewing and approving all proposed related party transactions, as defined in Item 404
of Regulation S-K;
    
    discussing the annual audited financial statements with management and the independent
auditors;
  113




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##### Table of Contents




    
    discussing with management and the independent auditors major issues regarding
accounting principles and financial statement presentations;
    
    reviewing reports prepared by management or the independent auditors relating to
significant financial reporting issues and judgments;
    
    discussing earnings press releases, as well as financial information and earnings
guidance provided to analysts and rating agencies;
    
    reviewing with management and the independent auditors the effect of regulatory and
accounting initiatives, as well as off-balance sheet structures on our financial
statements;
    
    discussing policies with respect to risk assessment and risk management;
    
    reviewing major issues as to the adequacy of our internal controls and any special audit
steps adopted in light of material control deficiencies;
    
    timely reviewing reports from the independent auditors regarding all critical accounting
policies and practices to be used by our company, all alternative treatments of financial
information within GAAP that have been discussed with management and all other material
written communications between the independent auditors and management;
    
    establishing procedures for the receipt, retention and treatment of complaints received
from our employees regarding accounting, internal controls or auditing matters and the
confidential, anonymous submission by our employees of concerns regarding questionable
accounting or auditing matters;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    such other matters that are specifically delegated to our audit committee by our board
of directors from time to time;
    
    meeting separately, periodically, with management, the internal auditors and the
independent auditors; and
    
    reporting regularly to the full board of directors.
 Compensation Committee
  
    
    reviewing and making recommendations to our board of directors regarding our
compensation policies and forms of compensation provided to our directors and officers,
including our chief executive officer;
    
    reviewing and determining bonuses for our officers and other employees;
    
    reviewing and determining stock-based compensation for our directors, officers,
employees and consultants;
    
    administering our equity incentive plans in accordance with the terms thereof; and
    
    such other matters that are specifically delegated to the compensation committee by our
board of directors from time to time.
  114




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##### Table of Contents



D. EMPLOYEES
  As of December 31, 2010Number
    
    
    PercentHeadquarters
    
    
    588
    
    
    
    7
    %Shanda Online
    
    
    2,170
    
    
    
    25.7
    %Shanda Games
    
    
    2,778
    
    
    
    33.0
    %Ku6 and certain of its affiliates
    
    
    816
    
    
    
    9.7
    %Cloudary Corporation and certain of its affiliates
    
    
    778
    
    
    
    9.2
    %Others
    
    
    1,301
    
    
    
    15.4
    %Total
    
    
    8,431
    
    
    
    100
    %
    E. SHARE OWNERSHIP
  
 Item 7.
    
    Major Shareholders and Related Party Transactions
 A. MAJOR SHAREHOLDERS
  
    
    each person known to us to own beneficially more than 5% of our ordinary shares; and
    
    each of our directors and executive officers who beneficially own ordinary shares within
the meaning of Rule 13d-3 of the Exchange Act.
  115




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##### Table of Contents



Shares Beneficially OwnedPercentage ofName
    
    Number
    
    
    TotalTianqiao Chen(1)
    
    
    62,454,538
    
    
    
    55.3
    %Premium Lead Company Limited(2)
    
    
    60,000,000
    
    
    
    53.1
    %Crystal Day Holdings Limited(3)
    
    
    11,938,212
    
    
    
    10.6
    %FMR LLC(4)
    
    
    6,868,066
    
    
    
    6.1
    %Orbis Group(5)
    
    
    12,801,576
    
    
    
    11.3
    %Qianqian Luo(6)
    
    
    2,454,538
    
    
    
    2.2
    %Jingsheng Huang
    
    
    *
    
    
    
    *Qunzhao Tan(7)
    
    
    1,506,281
    
    
    
    1.3
    %Danian Chen(8)
    
    
    1,156,270
    
    
    
    1.0
    %Grace Wu
    
    
    *
    
    
    
    *Haifa Zhu
    
    
    *
    
    
    
    *Danning Mi
    
    
    *
    
    
    
    *
 
 *
    
    Upon exercise of all options currently exercisable or vesting within 60 days of the date of
this table, would beneficially own less than 1% of our ordinary shares.(1)
    
    Represents 60,000,000 ordinary shares owned by Premium Lead and 2,454,538 ordinary shares,
consisting of 1,227,269 ADSs, held by Fortune Capital Holdings Enterprises Limited. The number
of shares owned by Premium Lead was taken from the Schedule 13G filed with the SEC by Tianqiao
Chen on January 15, 2008. The percentage of beneficial ownership was calculated based on the
amount of our ordinary shares outstanding as of March 31, 2011.(2)
    
    Tianqiao Chen is the sole shareholder of Shanda Media Limited, which owns 60% of First Step
Investment Limited. First Step Investment Limited owns 60% of Premium Lead. Tianqiao Chen is a
director of First Step Investment Limited and Premium Lead. The number of shares was taken
from the Schedule 13G filed with the SEC by Premium Lead on January 15, 2008. The percentage
of beneficial ownership was calculated based on the amount of our ordinary shares outstanding
as of March 31, 2011.(3)
    
    Crystal Day Holdings Limited, a Hong Kong corporation, is wholly owned by Silver Rose
Investment Limited. Silver Rose Investment Limited is a British Virgin Islands corporation,
which in turn is wholly owned by HSBC International Trustee Limited acting as trustee of The
C&T Trust. The number of shares was taken from the Schedule 13G filed with the SEC by Crystal
Day Holdings Limited on January 7, 2008. The percentage of beneficial ownership was calculated
based on the amount of our ordinary shares outstanding as of March 31, 2011.(4)
    
    The number of shares was taken from the Schedule 13G/A filed with the SEC by FMR LLC on June
10, 2010. The percentage of beneficial ownership was calculated based on the amount of our
ordinary shares outstanding as of March 31, 2011.(5)
    
    The number of shares was taken from the Schedule 13G filed with the SEC by Orbis Group on
February 14, 2011. The percentage of beneficial ownership was calculated based on the amount
of our ordinary shares outstanding as of March 31, 2011.(6)
    
    Represents 2,454,538 ordinary shares, consisting of 1,227,269 ADSs, held by Fortune Capital
Holdings Enterprises Limited. Ordinary shares held by Fortune Capital Holdings Enterprises
Limited are held for the benefit of Qianqian Luo and her family members. Ms. Luo is our
director and the wife of Tianqiao Chen, our chairman and chief executive officer.(7)
    
    These ordinary shares, or stock options to purchase ordinary shares, are held by DBS Trustees
Limited acting as Trustees of the Three Gorges Trust for the benefit of Qunzhao Tan and his
family members.(8)
    
    Represents 1,156,270 ordinary shares, consisting of 198,000 ordinary shares and 479,135 ADSs,
held by DBS Trustees Limited acting as trustees of the Chi Feng Trust. Ordinary shares held by
DBS Trustees Limited acting as trustees of the Chi Feng Trust are held for the benefit of
Danian Chen and his family members.  116




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B. RELATED PARTY TRANSACTIONS
 Shanda Computer/Shanda Networking Arrangements
  Shareholder Rights and Corporate Governance
 Transfer of Ownership When Permitted by Law.
 Voting Arrangement.
 Share Pledge Agreement.
  117




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Other Related Party Transactions
 Game License Agreements with Actoz.
 
 Item 8.
    
    Financial Information
 A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
 Consolidated Financial Statements
  Legal Proceedings
    Dividend Policy
    B. SIGNIFICANT CHANGES
    118




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##### Table of Contents



Item 9.
    
    The Offer and Listing
 A. OFFER AND LISTING DETAILS
 Price Range of American Depositary Shares
  Market Price (US$)High
    
    
    LowYearly highs and lowsYear 2006
    
    
    22.21
    
    
    
    12.23Year 2007
    
    
    39.89
    
    
    
    20.59Year 2008
    
    
    37.60
    
    
    
    21.08Year 2009
    
    
    63.66
    
    
    
    26.19Year 2010
    
    
    59.00
    
    
    
    36.33Quarterly highs and lows:First quarter 2009
    
    
    39.53
    
    
    
    26.19Second quarter 2009
    
    
    63.66
    
    
    
    40.80Third quarter 2009
    
    
    61.93
    
    
    
    45.40Fourth quarter 2009
    
    
    53.14
    
    
    
    40.34First quarter 2010
    
    
    59.00
    
    
    
    38.50Second quarter 2010
    
    
    46.34
    
    
    
    38.62Third quarter 2010
    
    
    43.99
    
    
    
    36.33Fourth quarter 2010
    
    
    43.75
    
    
    
    37.86First quarter 2011
    
    
    48.88
    
    
    
    39.00Second quarter 2011 (through June 28, 2011)
    
    
    54.20
    
    
    
    35.15Monthly highs and lows:December 2010
    
    
    40.39
    
    
    
    37.86January 2011
    
    
    41.60
    
    
    
    39.11February 2011
    
    
    45.57
    
    
    
    39.00March 2011
    
    
    48.88
    
    
    
    41.01April 2011
    
    
    54.20
    
    
    
    42.29May 2011
    
    
    50.67
    
    
    
    40.81June 2011 (through June 28, 2011)
    
    
    43.51
    
    
    
    35.15
 B. PLAN OF DISTRIBUTION
  C. MARKETS
  D. SELLING SHAREHOLDER
   119




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##### Table of Contents



E. DILUTION
  F. EXPENSES OF THE ISSUE
  
 Item 10.
    
    Additional Information
 A. SHARE CAPITAL
  B. MEMORANDUM AND ARTICLES OF ASSOCIATION
  C. MATERIAL CONTRACTS
  D. EXCHANGE CONTROLS
     120




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##### Table of Contents



E. TAXATION
 The following is a general summary of certain Cayman Islands, PRC and U.S. federal income tax
considerations relevant to holders of our ADSs. The discussion is not intended to be, nor should it
be construed as, legal or tax advice to any particular holder of our ADSs. The discussion is based
on laws and relevant interpretations thereof in effect as of the date hereof, all of which are
subject to change or different interpretations, possibly with retroactive effect. The discussion
does not address U.S. state or local tax laws, or tax laws of jurisdictions other than the Cayman
Islands and the United States.
 Cayman Islands Taxation
   (1)
    
    that no law which is enacted in the Cayman Islands imposing any tax to be levied on
profits or income or gains or appreciation shall apply to the Company or its operations;
and(2)
    
    that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall
not be payable on the shares, debentures or other obligations of the Company.
  Peoples Republic of China Taxation
    121




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Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise
Restructuring Business Notice Concerning
the Strengthening of Enterprise Income Tax
Administration with Respect to Equity Transfers by Non-resident Enterprises
  U.S. Federal Income Taxation
  
    
    an individual citizen or resident of the United States;
    
    a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created or organized in or under the laws of the United States, any state thereof
or the District of Columbia; or
    
    an estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source.
  
    
    a dealer in securities or currencies;
    
    a financial institution;
    
    a regulated investment company;
    
    a real estate investment trust;
    
    an insurance company;
    
    a tax-exempt entity, including an individual retirement account or Roth IRA;
    
    a person holding our ADSs as part of a hedging, integrated or conversion transaction, a
constructive sale or a straddle;
    
    a trader in securities that has elected the mark-to-market method of tax accounting for
its securities;
    
    a person liable for alternative minimum tax;
    
    a person who owns 10% or more of our voting stock;
    
    a partnership or other pass-through entity for U.S. federal income tax purposes;
    
    a person whose functional currency is not the U.S. dollar; or
    
    a person who has acquired our ADSs pursuant to the exercise of any employee stock option
or otherwise as compensation.
  122




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ADSs
  Taxation of Dividends
      123




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##### Table of Contents



Taxation of Capital Gains
   Passive Foreign Investment Company Rules
   
    
    at least 75% of our gross income is passive income; or
    
    at least 50% of the value (determined on a quarterly basis) of our assets is
attributable to assets that produce or are held for the production of passive income.
    124




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##### Table of Contents




    
    the excess distribution or gain will be allocated ratably over a U.S. Holders holding
period for the ADSs;
    
    the amount allocated to the current taxable year, and any taxable year prior to the
first taxable year in which we were a PFIC, will be treated as ordinary income; and
    
    the amount allocated to each other year will be subject to tax at the highest tax rate
in effect for that year and the interest charge generally applicable to underpayments of
tax will be imposed on the resulting tax attributable to each such year.
        125




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##### Table of Contents



Information Reporting and Backup Withholding
    F. DIVIDENDS AND PAYING AGENTS
  G. STATEMENTS BY EXPERTS
  H. DOCUMENTS ON DISPLAY
      126




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##### Table of Contents



I. SUBSIDIARY INFORMATION
  
 Item 11.
    
    Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Risk
  Foreign Currency Risk
   
 Item 12.
    
    Description of Securities other than Equity Securities
 D. American Depositary Shares
   Persons depositing or withdrawing shares or surrendering orbeing issued ADRs must pay:
    
    For:Taxes, stamp duty and other governmental charges
    
         As necessaryRegistration fees
    
         For the registration of transfers of ADSsCable, telex and facsimile transmission expenses
    
         As necessaryA fee of US$5.00 or less per 100 ADS
    
         The execution and delivery of ADRs and the surrender of ADRs     Distributions other than cash, shares, or rights to subscribe for additional sharesA fee of US$0.02 or less per ADS
    
         Any cash distributions     For depositary services, except to the extent a fee of US$0.02 was charged for any cash
distributions during the same calendar yearAny charges, fees or expenses incurred by the Depositary or
its agents for servicing the deposited securities (which
charge shall be payable at the sole discretion of the
Depositary by billing holders for such charge or by deducting
such charge from one or more cash dividends or other cash
distributions).
    
         As necessary
  127




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PART II
 
 Item 13.
    
    Defaults, Dividend Arrearages and Delinquencies
  
 Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
 A.  D. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
  E. USE OF PROCEEDS
  
 Item 15.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   128




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Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control over Financial Reporting
  
 Item 16A.
    
    Audit Committee Financial Expert
   
 Item 16B.
    
    Code of Ethics
   129




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##### Table of Contents



Item 16C.
    
    Principal Accountant Fees and Services
  For the year ended December 31,2009
    
    
    2010RMB
    
    
    RMB
    
    
    US$(in thousands)Audit fees (1)
    
    
    26,290
    
    
    
    24,117
    
    
    
    3,859Including: Shanda Games
    
    
    11,540
    
    
    
    8,486
    
    
    
    1,491Ku6
    
    
    2,380
    
    
    
    6,776
    
    
    
    1,027Audit-related fees (2)
    
    
    550
    
    
    
    470
    
    
    
    71Including: Shanda Games
    
    
    
    
    
    
    
    
    
    
    Ku6
    
    
    
    
    
    
    
    
    
    
    Others (3)
    
    
    
    
    
    
    195
    
    
    
    30Including: Shanda Games
    
    
    
    
    
    
    
    
    
    
    Ku6
    
    
    
    
    
    
    195
    
    
    
    30Total
    
    
    26,840
    
    
    
    24,782
    
    
    
    3,960
 
 (1)
    
    Audit fees means the aggregate fees in each of the fiscal years listed for professional
services rendered by our principal auditors for the audit of our annual consolidated financial
statements or services that are normally provided by the auditors in connection with statutory
and regulatory filings or engagements. Services comprising the fees disclosed under this
category also involve principally limited reviews performed on our consolidated financial
statements and the audits of the annual financial statements of our subsidiaries and
affiliated companies.(2)
    
    Audit-related fees means the aggregate fees in each of the fiscal years listed for assurance
and related services by our principal auditors that are reasonably related to the performance
of the audit or review of our financial statements and are not reported under Audit fees.(3)
    
    Other fees means the aggregate fees for compliance, advisory and other tax related service. 
 Item 16D.
    
    Exemptions from the Listing Standards for Audit Committees
  
 Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 (d) MaximumApproximate U.S.(b) Average Price
    
    
    (c) Total Number of
    
    
    dollar Value of ADS(a) Total Number of
    
    
    Paid per ADS in
    
    
    ADS Purchased as
    
    
    that May Yet BeADS Purchased
    
    
    US$
    
    
    Part of Publicly
    
    
    Purchased UnderPeriod
    
    (1)
    
    
    (2)
    
    
    Announced Plan
    
    
    the Plan in US$March 1  March 31, 2010
    
    
    4,699,639
    
    
    
    42.28
    
    
    
    4,699,639
    
    
    
    423,988,021April 1  April 30, 2010
    
    
    2,211,072
    
    
    
    44.71
    
    
    
    2,211,072
    
    
    
    325,130,992May 1  May 31, 2010
    
    
    2,512,500
    
    
    
    42.53
    
    
    
    2,512,500
    
    
    
    218,274,367June 1  June 30, 2010
    
    
    535,783
    
    
    
    41.99
    
    
    
    535,783
    
    
    
    195,776,839September 1  September 30, 2010
    
    
    445,143
    
    
    
    38.29
    
    
    
    445,143
    
    
    
    178,732,314October 1  October 31, 2010
    
    
    552,675
    
    
    
    39.50
    
    
    
    552,675
    
    
    
    156,901,652November 1  November 30, 2010
    
    
    205,423
    
    
    
    39.92
    
    
    
    205,423
    
    
    
    148,701,166December 1  December 31, 2010
    
    
    346,954
    
    
    
    39.24
    
    
    
    346,954
    
    
    
    135,086,692January 1  January 31, 2011
    
    
    102,404
    
    
    
    39.81
    
    
    
    102,404
    
    
    
    131,009,989February 1  February 28, 2011
    
    
    49,389
    
    
    
    39.89
    
    
    
    49,389
    
    
    
    129,039,862June 1  June 28, 2011
    
    
    319,064
    
    
    
    37.04
    
    
    
    319,064
    
    
    
    117,221,731
 
 (1)
    
    On September 8, 2008, we announced that our board of directors authorized
us to repurchase up
to US$200 million worth of our outstanding ADSs from time to time and on December 30, 2008, our
board of directors authorized us to repurchase an additional US$100 million worth of outstanding
ADSs. On March 22, 2010, we announced that our board of directors authorized us to repurchase
up to US$300 million worth of our outstanding ADSs from time to time. On June 1, 2010, we
announced that our board of directors authorized us to repurchase up to US$200 million worth of
our outstanding ADSs from time to time.(2)
    
    Average price paid per ADS repurchased is the execution price, excluding commissions paid to
brokers.  130




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##### Table of Contents



Item 16F.
    
    Change in Registrants Certifying Accountant
  
 Item 16G.
    
    Corporate Governance
     PART III
 
 Item 17.
    
    Financial Statements
  
 Item 18.
    
    Financial Statements
   131




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Item 19.
    
    Exhibits
 Number
    
    Description1.1
    
    
    Amended and Restated Memorandum and Articles of Association of Shanda
Interactive Entertainment Limited (incorporated by reference to
Exhibit 3.1 to our Registration Statement on Form F-1 (file no.
333-114177) filed with the Commission on May 7, 2004).2.1
    
    
    Specimen Ordinary Share Certificate (incorporated by reference to
Exhibit 4.1 to our Registration Statement on Form F-1 (file no.
333-114177) filed with the Commission on May 7, 2004).2.2
    
    
    Specimen of American Depositary Receipts (incorporated by reference
to Exhibit A to Exhibit 1 to our Registration Statement on Form F-6
POS (file no. 333-114759) filed with the Commission on June 9, 2004).2.3
    
    
    Form of Deposit Agreement (incorporated by reference to Exhibit 1 to
our Post-Effective Amendment No. 1 to the Form F-6 (file no.
333-114759) filed with the Commission on June 9, 2004).2.4
    
    
    Sale and Purchase Agreement, among Shanda Interactive Entertainment
Limited, Jong Hyun Lee, Il Wang Park, Byung Chan Park, Jin Ho Lee.
Sang Jun Roh, Sung Gon Bae and Yong Sung Cho, dated November 29, 2004
in connection with the sale of shares of Actoz Soft Co., Ltd. to
Shanda Interactive Entertainment Limited (incorporated by reference
to Exhibit 2.7 to our 2004 annual report on Form 20-F (file no.
000-50705) filed with the Commission on May 31, 2005).2.5
    
    
    Indenture dated September 16, 2008, among Shanda Interactive
Entertainment Limited, as Issuer, Citicorp International Limited, as
Trustee, and Citibank, N.A., London Branch, as Paying Agent, Note
Registrar, Conversion Agent and Custodian (incorporated by reference
to Exhibit 2.5 to our amended 2009 annual report on Form 20-F/A (file
no. 000-50705) filed with the Commission on November 5, 2010).2.6
    
    
    Form of 2.0% Convertible Senior Note due 2011 (incorporated by
reference to Exhibit 2.5 to our amended 2009 annual report on Form
20-F/A (file no. 000-50705) filed with the Commission on November 5,
2010).4.1
    
    
    Employee Stock Option Plan and form of share option agreement
(incorporated by reference to Exhibit 10.1 to our Registration
Statement on Form F-l (file no. 333-114177) filed with the Commission
on April 2, 2004).4.2
    
    
    Employee Equity Compensation Plan (incorporated by reference to
Exhibit 99.2 to our press release on Form 6-K (file no. 000-50705)
filed with the Commission on September 22, 2005).4.3
    
    
    Shanda Games Limited 2008 Equity Compensation Plan (incorporated by
reference to Exhibit 10.01 to Shanda Games Limiteds Registration
Statement on Form F-1 (file no. 333-161708) filed with the Commission
on September 3, 2009).4.4
    
    
    Articles of Association of Shengqu Information Technology (Shanghai)
Co., Ltd. (incorporated by reference to Exhibit 10.21 to our
Registration Statement on Form F-l (file no. 333-114177) filed with
the Commission on April 2, 2004).4.5
    
    
    Equity Entrustment Agreement among Tianqiao Chen, Danian Chen and
Shanda Computer (Shanghai) Co., Ltd. dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.4 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.6
    
    
    Equity Pledge Agreement among Tianqiao Chen, Danian Chen and Shanda
Computer (Shanghai) Co., Ltd. dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.5 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).
  132




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##### Table of Contents



Number
    
    Description4.7
    
    
    Proxy executed by Tianqiao Chen in favor of Shanda Computer
(Shanghai) Co., Ltd. dated July 1, 2008 (English Translation)
(incorporated by reference to Exhibit 4.6 to our annual report on
Form 20-F (file no. 000-50705) filed with the Commission on June 30,
2009).4.8
    
    
    Proxy executed by Danian Chen in favor of Shanda Computer (Shanghai)
Co., Ltd. dated July 1, 2008 (English Translation) (incorporated by
reference to Exhibit 4.7 to our annual report on Form 20-F (file no.
000-50705) filed with the Commission on June 30, 2009).4.9
    
    
    Assignment Agreement of Purchase Option and Cooperation Agreement
among Shanda Computer (Shanghai) Co., Ltd., Shanghai Shanda
Networking Development Co., Ltd., Shengqu Information Technology Co.,
Ltd., Tianqiao Chen and Danian Chen dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.8 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.10
    
    
    Business Operation Agreement among Shanda Computer (Shanghai) Co.,
Ltd., Shanghai Shanda Networking Development Co., Ltd., Tianqiao Chen
and Danian Chen dated July 1, 2008 (English Translation)
(incorporated by reference to Exhibit 4.9 to our annual report on
Form 20-F (file no. 000-50705) filed with the Commission on June 30,
2009).4.11
    
    
    Exclusive Consulting and Service Agreement between Shanda Computer
(Shanghai) Co., Ltd. and Shanghai Shanda Networking Development Co.,
Ltd. dated July 1, 2008 (English Translation) (incorporated by
reference to Exhibit 4.10 to our annual report on Form 20-F (file no.
000-50705) filed with the Commission on June 30, 2009).4.12
    
    
    Termination Agreement to the Share Pledge Agreement among Shengqu
Information Technology (Shanghai) Co., Ltd., Tianqiao Chen and Danian
Chen dated July 1, 2008 (English Translation) (incorporated by
reference to Exhibit 4.11 to our annual report on Form 20-F (file no.
000-50705) filed with the Commission on June 30, 2009).4.13
    
    
    Equity Entrustment Agreement among Dongxu Wang, Yingfeng Zhang,
Shengqu Information Technology (Shanghai) Co., Ltd. and Shanghai
Shulong Technology Development Co., Ltd. dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.12 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.14
    
    
    Equity Pledge Agreement among Dongxu Wang, Yingfeng Zhang and Shengqu
Information Technology (Shanghai) Co., Ltd. dated July 1, 2008
(English Translation) (incorporated by reference to Exhibit 4.13 to
our annual report on Form 20-F (file no. 000-50705) filed with the
Commission on June 30, 2009).4.15
    
    
    Business Operation Agreement among Dongxu Wang, Yingfeng Zhang,
Shengqu Information Technology (Shanghai) Co., Ltd. and Shanghai
Shulong Technology Development Co., Ltd. dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.17 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.16
    
    
    Proxy executed by Dongxu Wang in favor of Shengqu Information
Technology (Shanghai) Co., Ltd. dated July 1, 2008 (incorporated by
reference to Exhibit 4.14 to our annual report on Form 20-F (file no.
000-50705) filed with the Commission on June 30, 2009).4.17
    
    
    Proxy executed by Yingfeng Zhang in favor of Shengqu Information
Technology (Shanghai) Co., Ltd. dated July 1, 2008 (incorporated by
reference to Exhibit 4.15 to our annual report on Form 20-F (file no.
000-50705) filed with the Commission on June 30, 2009).
  133




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Number
    
    Description4.18
    
    
    Equity Disposition Agreement among Dongxu Wang, Yingfeng Zhang,
Shengqu Information Technology (Shanghai) Co., Ltd. and Shanghai
Shulong Technology Development Co., Ltd. dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.16 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.19
    
    
    Exclusive Consulting and Service Agreement between Shengqu
Information Technology (Shanghai) Co., Ltd. and Shanghai Shulong
Technology Development Co., Ltd. dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.18 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.20
    
    
    Loan Agreement between Shengqu Information Technology (Shanghai) Co.,
Ltd. and Dongxu Wang dated July 1, 2008 (English Translation)
(incorporated by reference to Exhibit 4.19 to our annual report on
Form 20-F (file no. 000-50705) filed with the Commission on June 30,
2009).4.21
    
    
    Loan Agreement between Shengqu Information Technology (Shanghai) Co.,
Ltd. and Yingfeng Zhang dated July 1, 2008 (English Translation)
(incorporated by reference to Exhibit 4.20 to our annual report on
Form 20-F (file no. 000-50705) filed with the Commission on June 30,
2009).4.22
    
    
    Termination Agreement to the Loan Agreement between Shanghai Shanda
Networking Co., Ltd. and Yingfeng Zhang dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.21 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.23
    
    
    Termination Agreement to the Share Purchase Option Agreement among
Shanghai Shulong Technology Development Co., Ltd., Shanghai Shanda
Networking Co., Ltd. and Yingfeng Zhang dated July 1, 2008 (English
Translation) (incorporated by reference to Exhibit 4.22 to our annual
report on Form 20-F (file no. 000-50705) filed with the Commission on
June 30, 2009).4.24
    
    
    Termination Agreement to the Share Pledge Agreement between Shanghai
Shanda Networking Co., Ltd. and Yingfeng Zhang dated July 1, 2008
(English Translation) (incorporated by reference to Exhibit 4.23 to
our annual report on Form 20-F (file no. 000-50705) filed with the
Commission on June 30, 2009).4.25
    
    
    Software Licensing Agreement among Shanghai Shanda Networking Co.,
Ltd., Shanghai Pudong New Area Imp. & Exp. Corp. and Actoz Soft Co.,
Ltd., dated June 29, 2001, (incorporated by reference to Exhibit
10.17 to our Registration Statement on Form F-1 (file no. 333-114177)
filed with the Commission on April 20, 2004).4.26
    
    
    Supplemental Agreement among Shanghai Shanda Networking Co., Ltd.,
Actoz Soft Co., Ltd. and Wemade Entertainment Co., Ltd., dated July
14, 2002, (incorporated by reference to Exhibit 10.18 to our
Registration Statement on Form F-1 (file no. 333-114177) filed with
the Commission on April 2, 2004).4.27
    
    
    Settlement Agreement between Shanghai Shanda Networking Co., Ltd.,
and Actoz Soft Co., Ltd., dated August 19, 2003, (incorporated by
reference to Exhibit 10.22 to our Registration Statement on Form F-1
(file no. 33-114177) filed with the Commission on April 20, 2004).4.28
    
    
    Amendment Agreement among Shanghai Shanda Networking Co., Ltd., Actoz
Soft Co., Ltd, Shanghai Pudong Import & Export Co., Ltd. and Shengqu
Information Technology (Shanghai) Co., Ltd., dated August 19, 2003,
(incorporated by reference to Exhibit 10.23 to our Registration
Statement on Form F-1 (file no. 333-114177) filed with the Commission
on April 20, 2004).
  134




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Number
    
    Description4.29
    
    
    Extension Agreement among Actoz Soft Co., Ltd, Shanghai Shanda
Networking Co., Ltd., and Shanghai Pudong Imp. & Exp. Co., Ltd.,
dated September 22, 2005 (Incorporated by reference to Exhibit 4.21
to our 2005 annual report on Form 20-F (file no. 000-50705) filed
with the Commission on June 29, 2006).4.30
    
    
    Extension Agreement II among Actoz Soft Co., Ltd, Shengqu Information
Technology (Shanghai) Co., Ltd. and Shanghai Pudong Imp. & Exp. Co.,
Ltd., dated November 26, 2008 (incorporated by reference to Exhibit
10.21 to Shanda Games Limiteds Registration Statement on Form F-1
(file no. 333-161708) filed with the Commission on September 3,
2009).4.31
    
    
    Assignment Agreement among Actoz Soft Co., Ltd, Shengqu Information
Technology (Shanghai) Co., Ltd. and Shanghai Shanda Networking Co.,
Ltd. dated July 1, 2008 (incorporated by reference to Exhibit 10.22
to Shanda Games Limiteds Registration Statement on Form F-1 (file
no. 333-161708) filed with the Commission on September 3, 2009).4.32
    
    
    Form of Indemnification Agreement for Directors and Officers
(incorporated by reference to Exhibit 10.24 to our Registration
Statement on Form F-1 (file no. 333-114177) filed with the Commission
on April 2, 2004).4.33
    
    
    Cloudary Corporation 2010 Equity Compensation Plan (incorporated by
reference to Exhibit 10.1 to Cloudary Corporation Registration
Statement on Form F-1 (file no. 333-174455) filed with the Commission
on May 24, 2011).8.1
    *
    
    List of Subsidiaries.11.1
    
    
    Code of Ethics (incorporated by reference to Exhibit 11.1 to our 2004
annual report on Form 20-F (file no. 000-50705) filed with the
Commission on May 31, 2005).12.1
    *
    
    Certification of Chief Executive Officer Required by Rule 13a-14(a).12.2
    *
    
    Certification of Chief Financial Officer Required by Rule 13a-14(a).13.1
    *
    
    Certification of Chief Executive Officer Required by Rule 13(a)-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United States Code.13.2
    *
    
    Certification of Chief Financial Officer Required by Rule 13(a)-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United States Code.15.1
    *
    
    Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company,
independent registered public accounting firm.
 
 *
    
    filed herewith.  135




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SIGNATURE
  SHANDA INTERACTIVE ENTERTAINMENT LIMITEDBy:
    /s/ Tianqiao ChenName:
    Tianqiao ChenTitle:
    Chairman and Chief Executive Officer   136




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##### 



INDEX TO FINANCIAL STATEMENTS
SHANDA INTERACTIVE ENTERTAINMENT COMPANY
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Statements of Operations and Comprehensive Income for the years ended
December 31, 2010, 2009 and 2008
    
    
    F-3Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-5Consolidated Statements of Changes in Shareholders Equity for the years ended December
31, 2010, 2009 
and 2008
    
    
    F-6Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
    
    
    F-8Notes to the Consolidated Financial Statements
    
    
    F-11




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SHANDA INTERACTIVE ENTERTAINMENT LIMITED:
    F-1




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##### Table of Contents



F-2




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##### Table of Contents



SHANDA INTERACTIVE ENTERTAINMENT LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 For the years ended December 31Notes
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(Adjusted)(Note 7)
    
    
    
    
    
    
    (Note 4(4))Net revenues
    
    4(21)
    
    
    3,569,068,428
    
    
    
    5,235,377,876
    
    
    
    5,572,249,658
    
    
    
    844,280,251Cost of revenue
    
    4(24)
    
    
    (1,020,470,247
    )
    
    
    (1,477,626,160
    )
    
    
    (2,153,541,413
    )
    
    
    (326,294,153
    )Gross profit
    
    
    
    
    2,548,598,181
    
    
    
    3,757,751,716
    
    
    
    3,418,708,245
    
    
    
    517,986,098Operating expenses:Product development
    
    4(25)
    
    
    (274,653,604
    )
    
    
    (417,277,574
    )
    
    
    (683,364,752
    )
    
    
    (103,540,114
    )Sales and marketing
    
    4(26)
    
    
    (317,950,533
    )
    
    
    (516,932,144
    )
    
    
    (771,570,907
    )
    
    
    (116,904,683
    )General and administrative
    
    4(27)
    
    
    (513,710,546
    )
    
    
    (779,155,362
    )
    
    
    (1,112,944,794
    )
    
    
    (168,627,999
    )Total operating expenses
    
    
    
    
    (1,106,314,683
    )
    
    
    (1,713,365,080
    )
    
    
    (2,567,880,453
    )
    
    
    (389,072,796
    )Operating income from continuing operations
    
    
    
    
    1,442,283,498
    
    
    
    2,044,386,636
    
    
    
    850,827,792
    
    
    
    128,913,302Interest income
    
    
    
    
    72,590,963
    
    
    
    71,116,026
    
    
    
    144,538,902
    
    
    
    21,899,834Interest expense
    
    21
    
    
    (30,023,098
    )
    
    
    (100,739,360
    )
    
    
    (102,605,627
    )
    
    
    (15,546,307
    )Investment income
    
    15
    
    
    8,179,567
    
    
    
    42,523,915
    
    
    
    3,654,635
    
    
    
    553,733Other income, net
    
    8
    
    
    29,380,468
    
    
    
    203,577,688
    
    
    
    254,830,276
    
    
    
    38,610,648Income before income tax expenses from continuing operations
    
    
    
    
    1,522,411,398
    
    
    
    2,260,864,905
    
    
    
    1,151,245,978
    
    
    
    174,431,210Income tax expenses
    
    9
    
    
    (276,471,101
    )
    
    
    (485,796,644
    )
    
    
    (369,758,991
    )
    
    
    (56,024,090
    )Equity in losses of affiliated companies
    
    14
    
    
    (337,384
    )
    
    
    (50,544,885
    )
    
    
    (8,992,925
    )
    
    
    (1,362,564
    )Income from continuing operations, net of tax
    
    
    
    
    1,245,602,913
    
    
    
    1,724,523,376
    
    
    
    772,494,062
    
    
    
    117,044,556Discontinued operations
    
    7Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    (4,968,389
    )
    
    
    (46,950
    )
    
    
    (7,114
    )Gain from disposal of discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    30,604,371
    
    
    
    4,637,026Income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    (4,968,389
    )
    
    
    30,557,421
    
    
    
    4,629,912Net income
    
    
    
    
    1,245,602,913
    
    
    
    1,719,554,987
    
    
    
    803,051,483
    
    
    
    121,674,468Add: Net loss attributable to the non-controlling interests from discontinued operations
    
    7
    
    
    
    
    
    
    2,432,847
    
    
    
    11,055
    
    
    
    1,675Less: Net income attributable to non-controlling interests from continuing operations
    
    4(37), 23
    
    
    (12,157,777
    )
    
    
    (116,175,822
    )
    
    
    (178,180,675
    )
    
    
    (26,997,072
    )Less: Net income attributable to redeemable preferred shares issued by a subsidiary and redeemable non-controlling interests from continuing operations
    
    6, 22
    
    
    (4,770,940
    )
    
    
    (13,247,741
    )
    
    
    (10,730,895
    )
    
    
    (1,625,893
    )Net income attributable to Shanda Interactive Entertainment Limited
    
    
    
    
    1,228,674,196
    
    
    
    1,592,564,271
    
    
    
    614,150,968
    
    
    
    93,053,178Income from continuing operations, net of tax, attributable to Shanda Interactive Entertainment Limited
    
    
    
    
    1,228,674,196
    
    
    
    1,595,099,813
    
    
    
    583,582,492
    
    
    
    88,421,591Income (loss) from discontinued operations, net of tax, attributable to Shanda Interactive Entertainment Limited
    
    7
    
    
    
    
    
    
    (2,535,542
    )
    
    
    30,568,476
    
    
    
    4,631,587Net income attributable to Shanda Interactive Entertainment Limited
    
    
    
    
    1,228,674,196
    
    
    
    1,592,564,271
    
    
    
    614,150,968
    
    
    
    93,053,178Net income
    
    
    
    
    1,245,602,913
    
    
    
    1,719,554,987
    
    
    
    803,051,483
    
    
    
    121,674,468Other comprehensive income:Unrealized appreciation (depreciation) of marketable securities
    
    4(8)
    
    
    110,007
    
    
    
    6,606,990
    
    
    
    (3,848,754
    )
    
    
    (583,145
    )Unrealized appreciation of investment in securities
    
    
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    75,758Currency translation adjustments of the Company
    
    4(3)
    
    
    (39,401,357
    )
    
    
    122,772
    
    
    
    92,521,390
    
    
    
    14,018,392Currency translation adjustments of subsidiaries
    
    4(3)
    
    
    (144,702,343
    )
    
    
    41,853,012
    
    
    
    (183,491,059
    )
    
    
    (27,801,676
    )Comprehensive income
    
    
    
    
    1,061,609,220
    
    
    
    1,768,137,761
    
    
    
    708,733,060
    
    
    
    107,383,797Comprehensive (income)/loss attributable to non-controlling interests
    
    
    
    
    55,277,752
    
    
    
    (148,896,893
    )
    
    
    (185,905,273
    )
    
    
    (28,167,466
    )Comprehensive income attributable to Shanda Interactive Entertainment Limited
    
    
    
    
    1,116,886,972
    
    
    
    1,619,240,868
    
    
    
    522,827,787
    
    
    
    79,216,331
   F-3




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##### Table of Contents



SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (CONTINUED)
 For the years ended December 31Notes
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(contd)
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(Adjusted)(Note 7)
    
    
    
    
    
    
    (Note 4(4))Earnings per share-Basic
    
    4(33), 10Income from continuing operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    8.59
    
    
    
    11.88
    
    
    
    4.86
    
    
    
    0.74Income (loss) from discontinued operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    0.25
    
    
    
    0.03Net income attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    8.59
    
    
    
    11.86
    
    
    
    5.11
    
    
    
    0.77Earnings per share-Diluted
    
    4(33), 10Income from continuing operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    8.49
    
    
    
    11.47
    
    
    
    4.74
    
    
    
    0.72Income (loss) from discontinued operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    0.25
    
    
    
    0.03Net income attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    8.49
    
    
    
    11.45
    
    
    
    4.99
    
    
    
    0.75Earnings per ADS-BasicIncome from continuing operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    17.18
    
    
    
    23.76
    
    
    
    9.72
    
    
    
    1.48Income (loss) from discontinued operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    
    
    
    
    (0.04
    )
    
    
    0.50
    
    
    
    0.06Net income attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    17.18
    
    
    
    23.72
    
    
    
    10.22
    
    
    
    1.54Earnings per ADS-DilutedIncome from continuing operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    16.98
    
    
    
    22.94
    
    
    
    9.48
    
    
    
    1.44Income (loss) from discontinued operations attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    
    
    
    
    (0.04
    )
    
    
    0.50
    
    
    
    0.06Net income attributable to Shanda Interactive Entertainment Limited common shareholders
    
    
    
    
    16.98
    
    
    
    22.90
    
    
    
    9.98
    
    
    
    1.50Weighted average ordinary shares outstanding
    
    10Basic
    
    
    
    
    142,991,542
    
    
    
    134,265,829
    
    
    
    120,125,785
    
    
    
    120,125,785Diluted
    
    
    
    
    144,674,902
    
    
    
    138,503,917
    
    
    
    123,075,244
    
    
    
    123,075,244Weighted average ADS outstandingBasic
    
    
    
    
    71,495,771
    
    
    
    67,132,915
    
    
    
    60,062,893
    
    
    
    60,062,893Diluted
    
    
    
    
    72,337,451
    
    
    
    69,251,959
    
    
    
    61,537,622
    
    
    
    61,537,622Share-based compensation included in:
    
    4(28), 25Cost of revenue
    
    
    
    
    (857,570
    )
    
    
    (1,175,183
    )
    
    
    (761,349
    )
    
    
    (115,356
    )Product development
    
    
    
    
    (1,865,540
    )
    
    
    (2,113,105
    )
    
    
    (33,145,629
    )
    
    
    (5,022,065
    )Sales and marketing
    
    
    
    
    (1,000,655
    )
    
    
    (1,102,519
    )
    
    
    (1,319,560
    )
    
    
    (199,933
    )General and administrative
    
    
    
    
    (52,318,564
    )
    
    
    (164,910,525
    )
    
    
    (163,287,169
    )
    
    
    (24,740,480
    )
   F-4




---



##### Table of Contents



SHANDA INTERACTIVE ENTERTAINMENT LIMITED
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,
    
    
    December 31,Note
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$(Note 4(4))ASSETSCurrent assets:Cash and cash equivalents
    
    4(5), 11
    
    
    10,959,312,759
    
    
    
    5,550,159,589
    
    
    
    840,933,271Restricted Cash
    
    4(6)
    
    
    54,470,589
    
    
    
    5,432,180
    
    
    
    823,058Short-term investments
    
    4(7)
    
    
    2,046,760,799
    
    
    
    2,257,852,616
    
    
    
    342,098,881Marketable securities
    
    4(8), 15
    
    
    20,791,016
    
    
    
    16,942,262
    
    
    
    2,567,009Accounts receivable, net of allowance for doubtful accounts
    
    4(9), 12
    
    
    115,710,131
    
    
    
    260,273,546
    
    
    
    39,435,386Due from related parties
    
    
    
    
    432,163
    
    
    
    
    
    
    
    Inventories
    
    4(10), 13
    
    
    30,896,767
    
    
    
    130,808,575
    
    
    
    19,819,481Deferred licensing fees and related costs
    
    4(23)
    
    
    56,258,356
    
    
    
    48,301,615
    
    
    
    7,318,427Prepayments and other current assets
    
    
    
    
    218,872,712
    
    
    
    425,722,100
    
    
    
    64,503,348Deferred tax assets
    
    7
    
    
    118,236,416
    
    
    
    115,649,430
    
    
    
    17,522,641Total current assets
    
    
    
    
    13,637,731,953
    
    
    
    8,811,141,913
    
    
    
    1,335,021,502Time deposits with maturity over one year
    
    4(7)
    
    
    
    
    
    
    1,215,273,568
    
    
    
    184,132,359Investment in equity and cost method investees
    
    4(12), 14
    
    
    55,334,219
    
    
    
    237,487,754
    
    
    
    35,982,993Investment in securities
    
    4(11)
    
    
    7,000,000
    
    
    
    41,630,500
    
    
    
    6,307,652Property and equipment
    
    4(13), 16
    
    
    481,362,227
    
    
    
    715,402,514
    
    
    
    108,394,320Intangible assets
    
    4(14), 17
    
    
    881,815,458
    
    
    
    2,020,327,862
    
    
    
    306,110,282Goodwill
    
    4(16), 18
    
    
    665,740,540
    
    
    
    1,142,934,128
    
    
    
    173,171,838Long-term rental deposits
    
    
    
    
    64,759,087
    
    
    
    62,794,465
    
    
    
    9,514,313Long-term prepayments
    
    4(17)
    
    
    206,544,329
    
    
    
    390,413,518
    
    
    
    59,153,563Other long term assets
    
    4(18)
    
    
    158,882,831
    
    
    
    235,647,719
    
    
    
    35,704,200Non-current deferred tax assets
    
    9
    
    
    16,266,128
    
    
    
    19,765,737
    
    
    
    2,994,809Total assets
    
    
    
    
    16,159,446,527
    
    
    
    14,892,819,678
    
    
    
    2,256,487,831LIABILITIESCurrent liabilities:Short term loan
    
    
    
    
    15,000,000
    
    
    
    
    
    
    
    Accounts payable
    
    
    
    
    104,879,526
    
    
    
    415,596,082
    
    
    
    62,969,103Licensing fees payable
    
    
    
    
    224,498,615
    
    
    
    246,959,117
    
    
    
    37,418,048Taxes payable
    
    
    
    
    205,510,818
    
    
    
    211,135,945
    
    
    
    31,990,295Deferred revenue
    
    4(22)
    
    
    452,252,511
    
    
    
    729,541,043
    
    
    
    110,536,522Due to related parties
    
    27
    
    
    6,193,386
    
    
    
    3,134,102
    
    
    
    474,864Other payables and accruals
    
    20
    
    
    787,561,511
    
    
    
    826,912,049
    
    
    
    125,289,704Deferred tax liabilities
    
    9
    
    
    107,848,669
    
    
    
    93,942,932
    
    
    
    14,233,778Convertible debt within one year
    
    21
    
    
    
    
    
    
    1,052,762,532
    
    
    
    159,509,475Total current liabilities
    
    
    
    
    1,903,745,036
    
    
    
    3,579,983,802
    
    
    
    542,421,789Non-current deferred tax liabilities
    
    9
    
    
    65,020,798
    
    
    
    389,971,837
    
    
    
    59,086,642Non-current income tax liabilities
    
    9
    
    
    9,427,110
    
    
    
    9,427,110
    
    
    
    1,428,350Non-current deferred revenue
    
    4(22)
    
    
    3,545,728
    
    
    
    76,313,953
    
    
    
    11,562,720Other long-term liabilities
    
    
    
    
    16,568,948
    
    
    
    49,311,847
    
    
    
    7,471,492Convertible debt
    
    21
    
    
    1,013,863,901
    
    
    
    
    
    
    
    Total liabilities
    
    
    
    
    3,012,171,521
    
    
    
    4,105,008,549
    
    
    
    621,970,993Commitments and contingencies
    
    30
    
    
    
    
    
    
    
    
    
    
    Redeemable preferred shares issued by a subsidiary and redeemable non-controlling interests
    
    6, 22
    
    
    157,982,473
    
    
    
    25,296,245
    
    
    
    3,832,764Shareholders equityOrdinary shares (US$0.01 par value, 186,000,000 shares authorized, 134,862,854 and 112,518,724 issued and outstanding as of December 31, 2009 and 2010)
    
    
    
    
    11,278,654
    
    
    
    9,756,982
    
    
    
    1,478,331Additional paid-in capital
    
    
    
    
    8,345,532,165
    
    
    
    6,976,772,960
    
    
    
    1,057,086,812Statutory reserves
    
    4(31)
    
    
    196,324,836
    
    
    
    207,573,567
    
    
    
    31,450,540Accumulated other comprehensive loss
    
    
    
    
    (89,197,412
    )
    
    
    (191,122,267
    )
    
    
    (28,957,918
    )Retained earnings
    
    
    
    
    3,082,085,053
    
    
    
    1,704,676,130
    
    
    
    258,284,262Total Shanda shareholders equity
    
    
    
    
    11,546,023,296
    
    
    
    8,707,657,372
    
    
    
    1,319,342,027Non-controlling interests
    
    4(37),23
    
    
    1,443,269,237
    
    
    
    2,054,857,512
    
    
    
    311,342,047Total equity
    
    
    
    
    12,989,292,533
    
    
    
    10,762,514,884
    
    
    
    1,630,684,074Total liabilities and shareholders equity
    
    
    
    
    16,159,446,527
    
    
    
    14,892,819,678
    
    
    
    2,256,487,831
   F-5




---



##### Table of Contents



SHANDA INTERACTIVE ENTERTAINMENT LIMITED
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Ordinary Share(US$0.01 Par Value)
    
    
    
    
    
    
    
    
    
    
    Accumulated Other
    
    
    
    
    
    
    Total ShandaNumber of
    
    
    
    
    
    
    Additional
    
    
    Statutory
    
    
    Comprehensive
    
    
    Retained
    
    
    Shareholders
    
    
    Non-controllingShares
    
    
    Par Value
    
    
    Paid in Capital
    
    
    Reserves
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity
    
    
    interests
    
    
    Total EquityRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBBalance as of January 1, 2008
    
    
    144,741,544
    
    
    
    11,962,574
    
    
    
    2,099,657,388
    
    
    
    147,694,485
    
    
    
    (22,170,294
    )
    
    
    1,386,272,658
    
    
    
    3,623,416,811
    
    
    
    216,297,997
    
    
    
    3,839,714,808Exercise of share option
    
    
    1,227,728
    
    
    
    85,306
    
    
    
    42,359,041
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,444,347
    
    
    
    
    
    
    
    42,444,347Share-based compensation
    
    
    
    
    
    
    
    
    
    
    52,873,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,873,494
    
    
    
    3,168,835
    
    
    
    56,042,329Repurchase of shares
    
    
    (9,037,538
    )
    
    
    (630,706
    )
    
    
    (98,295,606
    )
    
    
    
    
    
    
    
    
    
    
    (740,759,871
    )
    
    
    (839,686,183
    )
    
    
    
    
    
    
    (839,686,183
    )Prepayment for share repurchase
    
    
    
    
    
    
    
    
    
    
    (373,067,467
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (373,067,467
    )
    
    
    
    
    
    
    (373,067,467
    )Repurchase of own shares by a subsidiary
    
    
    
    
    
    
    
    
    
    
    (8,950,757
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,950,757
    )
    
    
    (8,915,025
    )
    
    
    (17,865,782
    )Unrealized net appreciation of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,007
    
    
    
    
    
    
    
    110,007
    
    
    
    
    
    
    
    110,007Currency translation adjustments of the Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,401,357
    )
    
    
    
    
    
    
    (39,401,357
    )
    
    
    
    
    
    
    (39,401,357
    )Currency translation adjustments of a subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,495,874
    )
    
    
    
    
    
    
    (72,495,874
    )
    
    
    (72,206,469
    )
    
    
    (144,702,343
    )Equity pick-up of the equity movement in an affiliated company
    
    
    
    
    
    
    
    
    
    
    842,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842,282
    
    
    
    838,923
    
    
    
    1,681,205Purchase of additional equity interest in a subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,126,657
    )
    
    
    (11,126,657
    )Non-controlling interest arising from business combination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,810,010
    
    
    
    3,810,010Capital contribution to a subsidiary by non-controlling shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    5,000Allocation of equity component of convertible debt upon issuance
    
    
    
    
    
    
    
    
    
    
    216,269,142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216,269,142
    
    
    
    
    
    
    
    216,269,142Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,228,674,196
    
    
    
    1,228,674,196
    
    
    
    12,157,777
    
    
    
    1,240,831,973Appropriations to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,060,017
    
    
    
    
    
    
    
    (36,060,017
    )
    
    
    
    
    
    
    
    
    
    
    Balance as of December 31, 2008
    
    
    136,931,734
    
    
    
    11,417,174
    
    
    
    1,931,687,517
    
    
    
    183,754,502
    
    
    
    (133,957,518
    )
    
    
    1,838,126,966
    
    
    
    3,831,028,641
    
    
    
    144,030,391
    
    
    
    3,975,059,032Exercise of share option
    
    
    1,390,332
    
    
    
    85,572
    
    
    
    72,182,442
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,268,014
    
    
    
    
    
    
    
    72,268,014Share-based compensation
    
    
    
    
    
    
    
    
    
    
    26,837,206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,837,206
    
    
    
    142,464,126
    
    
    
    169,301,332Repurchase of shares
    
    
    (3,604,132
    )
    
    
    (233,989
    )
    
    
    336,269,839
    
    
    
    
    
    
    
    
    
    
    
    (336,035,850
    )
    
    
    
    
    
    
    
    
    
    
    Exercise of share option of subsidiaries
    
    
    
    
    
    
    
    
    
    
    1,263,127
    
    
    
    
    
    
    
    9,990
    
    
    
    
    
    
    
    1,273,117
    
    
    
    14,741,100
    
    
    
    16,014,217Unrealized net appreciation of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,963,156
    
    
    
    
    
    
    
    6,963,156
    
    
    
    (356,166
    )
    
    
    6,606,990Currency translation adjustments of the Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,772
    
    
    
    
    
    
    
    122,772
    
    
    
    
    
    
    
    122,772Currency translation adjustments of a subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,590,669
    
    
    
    
    
    
    
    19,590,669
    
    
    
    22,262,343
    
    
    
    41,853,012Convertible debt conversion
    
    
    144,920
    
    
    
    9,897
    
    
    
    (7,337,074
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,327,177
    )
    
    
    
    
    
    
    (7,327,177
    )Change of economic interests in Shanda Games Limited upon its initial public offering
    
    
    
    
    
    
    
    
    
    
    5,993,051,794
    
    
    
    
    
    
    
    18,083,509
    
    
    
    
    
    
    
    6,011,135,303
    
    
    
    686,219,787
    
    
    
    6,697,355,090Purchase of additional equity interest in subsidiaries from non-controlling shareholders
    
    
    
    
    
    
    
    
    
    
    (4,677,433
    )
    
    
    
    
    
    
    (9,990
    )
    
    
    
    
    
    
    (4,687,423
    )
    
    
    (18,935,201
    )
    
    
    (23,622,624
    )Non-controlling interest arising from business combination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    332,628,354
    
    
    
    332,628,354Capital contribution to a subsidiary by non-controlling shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,726,275
    
    
    
    2,726,275Capital contribution to a subsidiary attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    (3,745,253
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,745,253
    )
    
    
    3,745,253
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,592,564,271
    
    
    
    1,592,564,271
    
    
    
    113,742,975
    
    
    
    1,706,307,246Appropriations to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,570,334
    
    
    
    
    
    
    
    (12,570,334
    )
    
    
    
    
    
    
    
    
    
    
    Balance as of December 31, 2009
    
    
    134,862,854
    
    
    
    11,278,654
    
    
    
    8,345,532,165
    
    
    
    196,324,836
    
    
    
    (89,197,412
    )
    
    
    3,082,085,053
    
    
    
    11,546,023,296
    
    
    
    1,443,269,237
    
    
    
    12,989,292,533
  F-6




---



##### Table of Contents



Ordinary Share(US$0.01 Par Value)
    
    
    
    
    
    
    
    
    
    
    Accumulated Other
    
    
    
    
    
    
    Total ShandaNumber of
    
    
    
    
    
    
    Additional
    
    
    Statutory
    
    
    Comprehensive
    
    
    Retained
    
    
    Shareholders
    
    
    Non-controllingShares
    
    
    Par Value
    
    
    Paid in Capital
    
    
    Reserves
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equity
    
    
    interests
    
    
    Total EquityRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBExercise of share option
    
    
    673,952
    
    
    
    45,166
    
    
    
    38,381,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,426,776
    
    
    
    
    
    
    
    38,426,776Share-based compensation
    
    
    
    
    
    
    
    
    
    
    20,175,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,175,697
    
    
    
    177,931,336
    
    
    
    198,107,033Repurchase of shares of the Company
    
    
    (23,018,378
    )
    
    
    (1,566,858
    )
    
    
    (1,340,332,898
    )
    
    
    
    
    
    
    
    
    
    
    (1,980,311,160
    )
    
    
    (3,322,210,916
    )
    
    
    
    
    
    
    (3,322,210,916
    )Repurchase of shares of a subsidiary
    
    
    
    
    
    
    
    
    
    
    (113,974,438
    )
    
    
    
    
    
    
    (756,938
    )
    
    
    
    
    
    
    (114,731,376
    )
    
    
    (141,193,745
    )
    
    
    (255,925,121
    )Exercise of share options of subsidiaries
    
    
    
    
    
    
    
    
    
    
    5,087,871
    
    
    
    
    
    
    
    199,972
    
    
    
    
    
    
    
    5,287,843
    
    
    
    23,662,453
    
    
    
    28,950,296Unrealized net depreciation of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,759,518
    )
    
    
    
    
    
    
    (2,759,518
    )
    
    
    (1,089,236
    )
    
    
    (3,848,754
    )Unrealized appreciation of investment in securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    500,000Currency translation adjustments of the Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,521,390
    
    
    
    
    
    
    
    92,521,390
    
    
    
    
    
    
    
    92,521,390Currency translation adjustments of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (181,585,053
    )
    
    
    
    
    
    
    (181,585,053
    )
    
    
    (1,906,006
    )
    
    
    (183,491,059
    )Convertible debt conversion
    
    
    296
    
    
    
    20
    
    
    
    (24,614
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,594
    )
    
    
    
    
    
    
    (24,594
    )Purchase of additional equity interest in a subsidiary from non-controlling shareholders
    
    
    
    
    
    
    
    
    
    
    2,845,547
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,845,547
    
    
    
    (25,814,014
    )
    
    
    (22,968,467
    )Issuance of ordinary shares and options by Shanda Games Limited relating to acquisition of Mochi Media, Inc.
    
    
    
    
    
    
    
    
    
    
    15,765,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,765,633
    
    
    
    8,284,397
    
    
    
    24,050,030Issuance of ordinary shares by Hurray! Holding Co., Ltd. (Hurray Holding) relating to acquisition of Ku6 Holding Limited
    
    
    
    
    
    
    
    
    
    
    41,031,687
    
    
    
    
    
    
    
    (9,398,000
    )
    
    
    
    
    
    
    31,633,687
    
    
    
    156,718,694
    
    
    
    188,352,381Non-controlling interest arising from other business combinations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97,997,032
    
    
    
    97,997,032Change in equity interests in Shanda Games Limited relating to purchase equity investment from other entity under common control by Shanda
    
    
    
    
    
    
    
    
    
    
    2,442,547
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,442,547
    
    
    
    (2,442,547
    )
    
    
    Change in equity interests in Hurray Holding relating to transfer the online audio business to Hurray Holding and acquire the wireless value-added service and recorded music businesses from Hurray Holding
    
    
    
    
    
    
    
    
    
    
    (38,937,610
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,937,610
    )
    
    
    38,937,610
    
    
    
    Issuance of ordinary shares by Hurray Holding to purchase additional equity interests in the online audio business from non-controlling shareholders
    
    
    
    
    
    
    
    
    
    
    (1,855,557
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,855,557
    )
    
    
    1,855,557
    
    
    
    Capital contribution to subsidiaries by non-controlling shareholders
    
    
    
    
    
    
    
    
    
    
    635,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    635,320
    
    
    
    102,704,680
    
    
    
    103,340,000Disposal of a subsidiary by Hurray Holding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (646,708
    )
    
    
    
    
    
    
    (646,708
    )
    
    
    (2,227,556
    )
    
    
    (2,874,264
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    614,150,968
    
    
    
    614,150,968
    
    
    
    178,169,620
    
    
    
    792,320,588Appropriations to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,248,731
    
    
    
    
    
    
    
    (11,248,731
    )
    
    
    
    
    
    
    
    
    
    
    Balance as of December 31, 2010
    
    
    112,518,724
    
    
    
    9,756,982
    
    
    
    6,976,772,960
    
    
    
    207,573,567
    
    
    
    (191,122,267
    )
    
    
    1,704,676,130
    
    
    
    8,707,657,372
    
    
    
    2,054,857,512
    
    
    
    10,762,514,884
   F-7




---



##### Table of Contents



SHANDA INTERACTIVE ENTERTAINMENT LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the years ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(Note 4(4))Cash flows from operating activities:Net income
    
    
    1,245,602,913
    
    
    
    1,719,554,987
    
    
    
    803,051,483
    
    
    
    121,674,468Adjustments for:Share-based compensation costs
    
    
    56,042,329
    
    
    
    169,301,332
    
    
    
    198,513,707
    
    
    
    30,077,834Depreciation of property and equipment
    
    
    90,587,389
    
    
    
    91,879,591
    
    
    
    142,515,122
    
    
    
    21,593,200Amortization of intangible assets
    
    
    148,135,327
    
    
    
    207,452,126
    
    
    
    378,520,842
    
    
    
    57,351,643Amortization and write-down of licensed video copyright
    
    
    
    
    
    
    
    
    
    
    105,971,544
    
    
    
    16,056,295Impairment and write off of goodwill
    
    
    15,952,603
    
    
    
    3,984,343
    
    
    
    15,000,000
    
    
    
    2,272,727Impairment of other long term assets
    
    
    
    
    
    
    
    
    
    
    10,172,528
    
    
    
    1,541,292Gain from disposal of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (30,604,371
    )
    
    
    (4,637,026
    )Gain on bargain purchase
    
    
    
    
    
    
    
    
    
    
    (7,397,545
    )
    
    
    (1,120,840
    )Write-down of inventory
    
    
    
    
    
    
    
    
    
    
    24,245,770
    
    
    
    3,673,602Amortization of land use right
    
    
    2,273,890
    
    
    
    4,070,495
    
    
    
    3,596,594
    
    
    
    544,938Provision for losses on receivables and other assets
    
    
    15,030,858
    
    
    
    24,012,027
    
    
    
    33,614,575
    
    
    
    5,093,117Loss from disposal of fixed assets
    
    
    891,250
    
    
    
    4,033,575
    
    
    
    3,749,645
    
    
    
    568,128Compensation charge for post combination services
    
    
    
    
    
    
    
    
    
    
    6,318,883
    
    
    
    957,407Disposal gain of marketable securities
    
    
    
    
    
    
    (42,523,915
    )
    
    
    
    
    
    
    Foreign exchange loss (gain)
    
    
    7,834,393
    
    
    
    5,700,933
    
    
    
    (788,503
    )
    
    
    (119,470
    )Deferred taxes
    
    
    50,244,477
    
    
    
    13,420,657
    
    
    
    (23,940,614
    )
    
    
    (3,627,366
    )Equity in loss of affiliated companies
    
    
    337,384
    
    
    
    50,544,885
    
    
    
    8,992,925
    
    
    
    1,362,564Interest expense
    
    
    30,023,098
    
    
    
    76,191,806
    
    
    
    79,594,224
    
    
    
    12,059,731Other income
    
    
    (7,996,151
    )
    
    
    
    
    
    
    (4,742,116
    )
    
    
    (718,502
    )Changes in assets and liabilities, net of acquisitions:Accounts receivable
    
    
    (10,835,868
    )
    
    
    (41,483,441
    )
    
    
    (57,663,552
    )
    
    
    (8,736,902
    )Inventories
    
    
    (1,009,682
    )
    
    
    (26,453,356
    )
    
    
    (106,180,961
    )
    
    
    (16,088,024
    )Due from related parties
    
    
    
    
    
    
    742,201
    
    
    
    173,433
    
    
    
    26,278Deferred licensing fees and related costs
    
    
    (3,595,591
    )
    
    
    (1,860,852
    )
    
    
    7,943,567
    
    
    
    1,203,571Prepayments and other current assets
    
    
    (132,600,276
    )
    
    
    17,449,164
    
    
    
    (91,920,201
    )
    
    
    (13,927,303
    )Upfront licensing fee paid in intangible assets
    
    
    (27,000,833
    )
    
    
    (105,749,144
    )
    
    
    (2,300,000
    )
    
    
    (348,485
    )Prepayment for upfront license fee in other long term assets
    
    
    (47,021,644
    )
    
    
    (19,754,361
    )
    
    
    (22,746,183
    )
    
    
    (3,446,391
    )Royalty advances and other long term assets
    
    
    
    
    
    
    (15,990,245
    )
    
    
    (23,041,059
    )
    
    
    (3,491,070
    )Compensation paid for post-combination services
    
    
    
    
    
    
    
    
    
    
    (39,740,000
    )
    
    
    (6,021,212
    )Other long-term deposits
    
    
    (13,731,015
    )
    
    
    (9,383,853
    )
    
    
    4,062,089
    
    
    
    615,468Accounts payable
    
    
    15,662,428
    
    
    
    28,444,237
    
    
    
    102,312,141
    
    
    
    15,501,840Licensing fees payable
    
    
    40,980,808
    
    
    
    31,740,390
    
    
    
    5,725,345
    
    
    
    867,477Taxes payable
    
    
    (10,012,822
    )
    
    
    86,645,436
    
    
    
    785,128
    
    
    
    118,959Deferred revenue
    
    
    107,760,135
    
    
    
    (60,157,944
    )
    
    
    200,443,912
    
    
    
    30,370,290Due to related parties
    
    
    (224
    )
    
    
    (87,777
    )
    
    
    (5,600,796
    )
    
    
    (848,605
    )Other payables and accruals
    
    
    172,328,138
    
    
    
    285,075,445
    
    
    
    (49,492,908
    )
    
    
    (7,498,925
    )Net cash provided by operating activities
    
    
    1,745,883,314
    
    
    
    2,496,798,742
    
    
    
    1,669,144,648
    
    
    
    252,900,708
  F-8




---



##### Table of Contents



SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 For the years ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(Note 4(4))Cash flows from investing activities:Increase (decrease) in restricted cash
    
    
    
    
    
    
    (702,075,103
    )
    
    
    702,075,103
    
    
    
    106,375,016Increase of short-term investments and time deposits with maturity over a year
    
    
    (134,544,456
    )
    
    
    (1,104,136,182
    )
    
    
    (1,407,140,754
    )
    
    
    (213,203,145
    )Purchase of marketable securities
    
    
    (25,341,941
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from disposal of marketable securities
    
    
    
    
    
    
    65,035,445
    
    
    
    
    
    
    
    Increase in loan receivable
    
    
    (16,350,000
    )
    
    
    (12,960,000
    )
    
    
    (7,900,000
    )
    
    
    (1,196,970
    )Purchase of property and equipment
    
    
    (95,135,704
    )
    
    
    (244,544,477
    )
    
    
    (242,405,682
    )
    
    
    (36,728,134
    )Payment for purchase of land use right
    
    
    
    
    
    
    (91,039,209
    )
    
    
    (181,098,283
    )
    
    
    (27,439,134
    )Prepayment for investment in equity investees
    
    
    
    
    
    
    
    
    
    
    (3,937,500
    )
    
    
    (596,591
    )Prepayment for purchase of subsidiaries and VIEs
    
    
    (11,170,000
    )
    
    
    (10,570,000
    )
    
    
    (8,000,000
    )
    
    
    (1,212,121
    )Proceeds from disposal of fixed assets
    
    
    896,851
    
    
    
    934,406
    
    
    
    4,286,428
    
    
    
    649,459Purchase of intangible assets
    
    
    (24,686,467
    )
    
    
    (27,437,309
    )
    
    
    (173,804,571
    )
    
    
    (26,334,026
    )Net cash paid for purchase of subsidiaries and VIEs
    
    
    (25,150,477
    )
    
    
    (171,767,411
    )
    
    
    (1,122,779,785
    )
    
    
    (170,118,149
    )Proceeds from disposal of a VIE, net
    
    
    (56,603
    )
    
    
    
    
    
    
    29,875,573
    
    
    
    4,526,602Repurchase of own shares by a subsidiary
    
    
    (17,865,782
    )
    
    
    
    
    
    
    
    
    
    
    Investment in securities
    
    
    
    
    
    
    (7,000,000
    )
    
    
    (34,130,500
    )
    
    
    (5,171,288
    )Investment in equity and cost method companies
    
    
    (39,327,000
    )
    
    
    (45,052,548
    )
    
    
    (173,893,659
    )
    
    
    (26,347,524
    )Net cash provided by (used in) investing activities
    
    
    (388,731,579
    )
    
    
    (2,350,612,388
    )
    
    
    (2,618,853,630
    )
    
    
    (396,796,005
    )Cash flows from financing activities:Proceeds from Shanda Game Limited initial public offering, net of issuance costs
    
    
    
    
    
    
    6,697,355,090
    
    
    
    
    
    
    
    Proceeds from issuance of common stock under stock option plan
    
    
    43,244,931
    
    
    
    73,614,376
    
    
    
    35,034,460
    
    
    
    5,308,252Proceeds from issuance of ordinary shares under stock option plan of subsidiaries
    
    
    
    
    
    
    16,014,217
    
    
    
    5,528,761
    
    
    
    837,691Proceeds from issuance of convertible debt, net of issuance costs
    
    
    1,171,303,200
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from a loan borrowed
    
    
    
    
    
    
    1,077,670,103
    
    
    
    
    
    
    
    Proceeds from issuance of preferred shares of a subsidiary, net of issuance costs
    
    
    139,963,792
    
    
    
    
    
    
    
    
    
    
    
    Repayment of a loan
    
    
    
    
    
    
    (376,795,000
    )
    
    
    (717,075,103
    )
    
    
    (108,647,743
    )Payment for the conversion of convertible debt
    
    
    
    
    
    
    (59,674,859
    )
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (839,686,183
    )
    
    
    
    
    
    
    (3,322,210,916
    )
    
    
    (503,365,290
    )Prepayment for repurchase of common stock
    
    
    (373,067,467
    )
    
    
    
    
    
    
    (255,925,121
    )
    
    
    (38,776,533
    )Cash paid for redemption of preferred shares issued by a subsidiary
    
    
    
    
    
    
    
    
    
    
    (168,636,786
    )
    
    
    (25,551,028
    )Settlement of convertible debt
    
    
    
    
    
    
    
    
    
    
    (338,953
    )
    
    
    (51,357
    )Net cash paid for purchase of additional shares in a subsidiary from minority shareholders
    
    
    (13,041,267
    )
    
    
    (23,622,624
    )
    
    
    (22,968,467
    )
    
    
    (3,480,071
    )Cash injection in VIE subsidiaries by non-controlling shareholders
    
    
    5,000
    
    
    
    2,726,275
    
    
    
    103,340,000
    
    
    
    15,657,576Net cash (used in) provided by financing activities
    
    
    128,722,006
    
    
    
    7,407,287,578
    
    
    
    (4,343,252,125
    )
    
    
    (658,068,503
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (73,330,885
    )
    
    
    7,994,440
    
    
    
    (116,192,063
    )
    
    
    (17,604,860
    )Net increase in cash and cash equivalents
    
    
    1,412,542,856
    
    
    
    7,561,468,372
    
    
    
    (5,409,153,170
    )
    
    
    (819,568,662
    )Cash and cash equivalents, beginning of year
    
    
    1,985,301,531
    
    
    
    3,397,844,387
    
    
    
    10,959,312,759
    
    
    
    1,660,501,933Cash and cash equivalents, end of year
    
    
    3,397,844,387
    
    
    
    10,959,312,759
    
    
    
    5,550,159,589
    
    
    
    840,933,271
  F-9




---



##### Table of Contents



SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 For the years ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(Note 4(4))Supplemental disclosure of cash flow information:Cash paid during the year for income taxes
    
    
    347,562,764
    
    
    
    305,011,840
    
    
    
    216,755,785
    
    
    
    32,841,786Cash paid during the year for interest of loan
    
    
    
    
    
    
    929,673
    
    
    
    618,270
    
    
    
    93,677Cash paid during the year for the interest of convertible debt
    
    
    
    
    
    
    23,574,448
    
    
    
    22,722,625
    
    
    
    3,442,822Supplemental disclosure of non-cash investing activities:Accrual related to purchase of property and equipment and intangible assets
    
    
    15,296,475
    
    
    
    11,064,304
    
    
    
    122,382,910
    
    
    
    18,542,865Acquisition related obligation at year end
    
    
    5,550,000
    
    
    
    48,800,000
    
    
    
    67,623,584
    
    
    
    10,245,998Issuance of ordinary shares and options by a subsidiary related to acquisition of Mochi Media, Inc.
    
    
    
    
    
    
    
    
    
    
    24,050,030
    
    
    
    3,643,944Issuance of ordinary shares by a subsidiary related to acquisition of Ku6 Holding Limited
    
    
    
    
    
    
    
    
    
    
    188,352,382
    
    
    
    28,538,240Supplemental disclosure of non-cash financing activities:Restricted cash related to the exercise of the employee stock option
    
    
    
    
    
    
    54,470,589
    
    
    
    5,432,180
    
    
    
    823,058Other receivables related to the exercise of the stock options at year end
    
    
    8,695,108
    
    
    
    7,348,746
    
    
    
    34,162,598
    
    
    
    5,176,151
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SHANDA INTERACTIVE ENTERTAINMENT LIMITED
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1. ORGANIZATION AND NATURE OF OPERATIONS
     Shanda Games Reorganization
   F-11




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F-12




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##### Table of Contents



Cloudary Reorganization
      F-13




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##### Table of Contents



Ku6 Restructuring
     2. SHANDA GAMES TRANSACTIONS
 (1) Initial public offering of Shanda Games
      F-14




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##### Table of Contents



(2) Gain on Initial Public Offering of Shanda Games
  (3) Shanda Interactives Shareholding in Shanda Games
 Shareholding and control
    Dilutive impact
     F-15




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##### Table of Contents



3. KU6 TRANSACTIONS
       F-16




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4. PRINCIPAL ACCOUNTING POLICIES
 (1) Basis of presentation
   (2) Consolidation
   Non-controlling Interest for Shanda Games
  Non-controlling Interest for Ku6
   F-17




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Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51
 ConsolidationsImprovements to Financial
Reporting by Enterprises Involved with VIEs
   
    
    Equipment leasing agreements, pursuant to which Shanda Networking, Nanjing Shanda and
Hangzhou Bianfeng lease a substantial majority of their operating assets from Shengqu;
 
    
    Technical support agreements, pursuant to which Shanda Computer, and Shengqu, provides
technical support for Shanda Networkings operations, respectively;
 
    
    Technology license agreements, pursuant to which Shanda Computer, and Shengqu, licenses
billing related technology and online game card sales systems to Shanda Networking, Nanjing
Shanda and Hangzhou Bianfeng;
 
    
    Software license agreements, pursuant to which Shengqu licenses certain game related
software to Shanda Networking, Nanjing Shanda and Hangzhou Bianfeng;
 
    
    A strategic consulting agreement, pursuant to which Shengqu provides strategic
consulting services to Shanda Networking; and
 
    
    Online game license agreements, pursuant to which Shanda Networking, Nanjing Shanda and
Hangzhou Bianfeng operate certain online games that are licensed or owned by Shengqu.
   F-18




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
    
    Loan Agreements between Shengqu and the shareholders of Shanghai Shulong. These loan
agreements provide for loans of RMB 10.8 million to the PRC employees for them to make
contributions to the registered capital of Shanghai Shulong in exchange for equity
interests in Shanghai Shulong. The loans are interest free and are repayable on demand, but
the shareholders may not repay all or any part of the loans without Shengqus prior written
consent.
 
    
    Equity Entrust Agreement between Shengqu and the shareholders of Shanghai Shulong,
pursuant to which the shareholders acknowledge their status as nominee shareholders.
 
    
    Equity Pledge Agreement among Shengqu, Shanghai Shulong and the shareholders of Shanghai
Shulong. Pursuant to this agreement, the shareholders pledged to Shengqu their entire
equity interests in Shanghai Shulong to secure the performance of their respective
obligations and Shanghai Shulongs obligations under the various agreements, including the
Equity Pledge Agreement, the Business Operation Agreement and the Exclusive Consulting and
Service Agreement. Without Shengqus prior written consent, neither of the shareholders
can transfer any equity interests in Shanghai Shulong.
 
    
    Equity Disposition Agreement among Shengqu, Shanghai Shulong and the shareholders of
Shanghai Shulong. Pursuant to this agreement, Shengqu and any third party designated by
Shengqu have the right, exercisable at any time during the term of the agreement, if and
when it is legal to do so under PRC laws and regulations, to purchase from the
shareholders, as the case may be, all or any part of their equity interests in Shanghai
Shulong at a purchase price equal to the lowest price permissible by the then-applicable
PRC laws and regulations. The agreement is for an initial term of 20 years, renewable upon
Shengqus request.
 
    
    Business Operation Agreement among Shengqu, Shanghai Shulong and the shareholders of
Shanghai Shulong. This agreement sets forth the rights of Shengqu to control the actions of
the shareholders of Shanghai Shulong.
  F-19




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
    
    Exclusive Consulting and Service Agreement between Shengqu and Shanghai Shulong.
Pursuant to this agreement, Shengqu has the exclusive right to provide technology support
and business consulting services to Shanghai Shulong for a fee.
 
    
    Proxies executed by the shareholders of Shanghai Shulong in favor of Shengqu. These
irrevocable proxies grant Shengqu or its designees the power to exercise the rights of the
shareholder as shareholders of Shanghai Shulong, including the right to appoint directors,
general manager and other senior management of Shanghai Shulong.
    
    
    Equity Entrust Agreement between Shanda Computer and the shareholders of Shanda
Networking and Shengzhan, pursuant to which the shareholders acknowledge their status as
nominee shareholders.
 
    
    Equity Pledge Agreement among Shanda Computer, Shanda Networking, Shengzhan and the
shareholders of Shanda Networking and Shengzhan. Pursuant to this agreement, the
shareholders pledged to Shanda Computer their entire equity interests in Shanda Networking
and Shengzhan to secure the performance of their respective obligations and Shanda
Networking and Shengzhans obligations under the various agreements, including the Equity
Pledge Agreement, the Business Operation Agreement and the Exclusive Consulting and Service
Agreement. Without Shanda Computers prior written consent, neither of the shareholders can
transfer any equity interests in Shanda Networking.
 
    
    Loan Agreements between Shanda Computer and the shareholders of Shengzhan. These loan
agreements provide for loans of RMB 10.0 million to the PRC employees for them to make
contributions to the registered capital of Shengzhan in exchange for equity interests in
Shengzhan. The loans are interest free and are repayable on demand, but the shareholders
may not repay all or any part of the loans without Shanda Computers prior written consent.
  F-20




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
    
    Assignment Agreement from Shengqu to Shanda Computer of a Purchase Option and
Cooperation Agreement by and between Tianqiao Chen, Danian Chen and Shanda Computer
pursuant to which Tianqiao Chen and Danian Chen jointly granted Shanda Computer an
exclusive option to purchase all of their equity interest in Shanda Networking, and Shanda
Networking granted Shanda Computer an exclusive option to purchase all of its assets if and
when (1) such purchase is permitted under applicable PRC law or (2) to the extent permitted
by law, with respect to his individual interest, either Tianqiao Chen and Danian Chen
ceases to be a director or employee of Shanda Networking or desires to transfer his equity
interest in Shanda Networking to a third party.
 
    
    Business Operation Agreement among Shanda Computer, Shanda Networking, Shengzhan and the
shareholders of Shanda Networking and Shengzhan. This agreement sets forth the rights of
Shanda Computer to control the actions of the shareholders of Shanda Networking and
Shengzhan.
 
    
    Exclusive Consulting and Service Agreement between Shanda Computer and Shanda Networking
and Shengzhan. Pursuant to this agreement, Shanda Computer has the exclusive right to
provide technology support and business consulting services to Shanda Networking and
Shengzhan for a fee.
 
    
    Proxies executed by the shareholders of Shanda Networking and Shengzhan in favor of
Shanda Computer. These irrevocable proxies grant Shanda Computer or its designees the
power to exercise the rights of the shareholder as shareholders of Shanda Networking and
Shengzhan, including the right to appoint directors, general manager and other senior
management of Shanda Networking and Shengzhan.
      F-21




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(3) Foreign currency translation
     F-22




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(4) Convenience translation
  (5) Cash and cash equivalents
   (6) Restricted cash
  (7) Short-term investments and time deposits with maturity over one year
   (8) Marketable securities
    F-23




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(9) Allowances for doubtful accounts
  (10) Inventories
  (11) Investment in securities
    F-24




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(12) Investment in equity investees
     F-25




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(13) Property and equipment
  Computer equipment
    
    3~5 yearsLeasehold improvements
    
    Lesser of the term of the lease or the estimated useful lives of the assetsFurniture and fixtures
    
    3~5 yearsMotor vehicles
    
    5 yearsOffice buildings
    
    20 years
  (14) Intangible assets
 Online game product development costs
 Accounting for Costs of Computer Software to be Sold, Leased
or Otherwise Marketed" .
 Websites and internally used software development costs
 Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use)
 Upfront licensing fees
 Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed
  F-26




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Software and copyrights
  Software technology, game engine, non-compete agreements, customer base, copyrights, writer
contracts, telecom relationships, bookstore relationships and trademark acquired through
business combinations
 Business Combinations copyrights, writer
contracts, telecom relationships, bookstore relationships
 Software technology
    
    0.5 to 7 yearsGame engine
    
    3 to 10 yearsNon-compete agreements
    
    2.5 to 5 yearsCustomer base
    
    2 to 5.5 yearsCopyrights
    
    5 to 10 yearsWriter contracts
    
    5 to 6 yearsTelecom relationships
    
    9 to 11 yearsBookstore relationships
    
    6 to 10 yearsTrademarks
    
    7.5 or 20 yearsIn-process research and development
    
    Write off immediately prior to
January 1, 2009 or
indefinite-lived and subject to
impairment testing until completed
or abandoned from January 1, 2009
 (15) Video production and acquisition costs and licensed video copyrights
  Video production and acquisition costs
    F-27




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Licensed video copyrights
     (16) Goodwill
   F-28




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Goodwill and other
intangible assets
 (17) Long-term prepayments
  (18) Other long-term assets
  Prepayment for upfront license fee
  Receivables due from independent companies
  Royalty advances
   F-29




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Prepayment for distribution rights
     Film production cost
  Issuance cost of convertible debt
  (19) Impairment of long-lived assets
   F-30




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(20) Financial instruments
  (21) Revenue recognition
 Online game revenue
     Overseas licensing revenues
  Online literature revenue
   F-31




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Wireless literature revenue
     
 
  F-32




---



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Offline literature distribution revenue
       F-33




---



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Customer Payments and Incentives
 Copyright licensing
  Online advertising services
   Multiple Element Arrangements
   F-34




---



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Accounting for Consideration Given by a Vendor to a
Customer
 Wireless value-added services
    Recorded music revenue:
   F-35




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Other revenues
      Customer loyalty program
    F-36




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Business tax and related surcharges
  (22) Deferred revenue
  (23) Deferred licensing fees and related costs
  (24) Cost of revenue
 Cost of online games and services rendered
    Cost of goods sold
   F-37




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(25) Product development
  (26) Sales and marketing
  (27) General and administrative
  (28) Share-based compensation
 Accounting for stock-based compensation
  (29) Leases
   F-38




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(30) Taxation
  Income Taxes
 Accounting for
Uncertainty in Income Taxes  An interpretation of FASB Statement No. 109
 (31) Statutory reserves
 China
       F-39




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Korea
  (32) Dividends
    (33) Earnings per share
   (34) Comprehensive income or loss
   F-40




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(35) Segment reporting
 Disclosures about Segments of an Enterprise and
Related Information
    www.ku6.com www.juchang.com
      F-41




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Year Ended December 31, 2010 (in RMB thousands)Shanda Games
    
    
    Shanda Online
    
    
    Ku6(3)
    
    
    Others(1)
    
    
    Elimination
    
    
    TotalNet revenues
    
    
    4,504,708
    
    
    
    1,024,379
    
    
    
    109,267
    
    
    
    1,029,760
    
    
    
    (1,095,864
    )
    
    
    5,572,250Costs of revenues
    
    
    (1,837,182
    )
    
    
    (229,374
    )
    
    
    (267,030
    )
    
    
    (685,482
    )
    
    
    865,527
    
    
    
    (2,153,541
    )Gross profit margins
    
    
    2,667,526
    
    
    
    795,005
    
    
    
    (157,763
    )
    
    
    344,278
    
    
    
    (230,337
    )
    
    
    3,418,709
 Year Ended December 31, 2009 (in RMB thousands)Shanda Games
    
    
    Shanda Online
    
    
    Others(1)
    
    
    Elimination
    
    
    TotalNet revenues
    
    
    4,806,705
    
    
    
    1,066,178
    
    
    
    519,076
    
    
    
    (1,156,581
    )
    
    
    5,235,378Costs of revenues
    
    
    (1,933,474
    )
    
    
    (203,249
    )
    
    
    (291,301
    )
    
    
    950,398
    
    
    
    (1,477,626
    )Gross profit margins
    
    
    2,873,231
    
    
    
    862,929
    
    
    
    227,775
    
    
    
    (206,183
    )
    
    
    3,757,752
 Year Ended December 31, 2008 (in RMB thousands)Shanda Games
    
    
    Shanda Online
    
    
    Others(1)
    
    
    Elimination
    
    
    TotalNet revenues
    
    
    3,376,756
    
    
    
    784,186
    (2)
    
    
    268,164
    
    
    
    (860,038
    )
    
    
    3,569,068Costs of revenues
    
    
    (1,489,361
    )
    
    
    (126,031
    )
    
    
    (171,941
    )
    
    
    766,863
    
    
    
    (1,020,470
    )Gross profit margins
    
    
    1,887,395
    
    
    
    658,155
    
    
    
    96,223
    
    
    
    (93,175
    )
    
    
    2,548,598
 (1)
    
    The Company also generates revenues from literature business, operation and management of the
provision of management software to internet café and operation of online chess and board
platform, WVAS and recorded music of Ku6 acquired in July 2009, etc. Although Yisheng was
acquired by Ku6 from the Company in August 2010 and is included in the Ku6 column above for
2010, Yisheng is not material for 2009 and 2008 and its results were not reclassified for
those years.(2)
    
    It represents fees for certain technical services as calculated pursuant to contractual
agreements entered into both prior to and in connection with the Separation. Therefore, net
revenues in 2008 were calculated using these methods of calculating prior to and after the
Separation, and hence net revenues for the years ended December 31, 2008 may not be comparable
with those for the years ended December 2009 and 2010.(3)
    
    The Group acquired Ku6 Holding in January 2010 and reported the online video business of Ku6
as a separate segment after the acquisition in January 2010 and the Restructuring in August
2010. (36) Fair value measurements
 Fair Value Measurements
  F-42




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(37) Business combinations and non-controlling interests
  Business combinations
    F-43




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Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No.51. Classification and Measurement of Redeemable
Securities
 (38) Reclassifications and revisions
   5. Recent accounting pronouncements
  Consolidations (Topic 810): Improvements
to Financial Reporting by Enterprises Involved with Variable Interest Entities" Amendments to FASB Interpretation No. 46
(R) Consolidation  Overall  Disclosure 
Variable Interest Entities
   F-44




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F-45




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6. BUSINESS COMBINATIONS
   Acquisitions completed in 2010
 (1) Mochi Media, Inc. (Mochi)
   F-46




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Total purchase price:
    
    RMBCash paid by Shanda Games to acquire the outstanding shares of Mochi
    
    
    400,878,989Ordinary shares issued by Shanda Games to acquire the outstanding shares
of Mochi
    
    
    22,182,806Cash paid by Shanda Games to replace options issued by Mochi
    
    
    13,616,968Options issued by Shanda Games to replace options issued by Mochi
    
    
    30,629,002Share based compensation related to post combination portion
    
    
    (28,761,778
    )438,545,987
 RMB
    
    
    Amortization periodCash and cash equivalents
    
    
    35,097,595Account receivables
    
    
    14,181,291Other current assets
    
    
    678,176Acquired intangible assets:Trademark
    
    
    218,441,600
    
    
    20 yearsSoftware technology
    
    
    184,310,100
    
    
    7 yearsNon-current deferred tax liability
    
    
    (161,100,680
    )Goodwill allocated to Shanda Games segment
    
    
    163,616,873Property and equipment, net
    
    
    1,911,256Other non-current assets
    
    
    694,902Current liabilities
    
    
    (15,167,114
    )Long term liabilities
    
    
    (4,118,012
    )Total purchase price
    
    
    438,545,987
   (2) Goldcool Holdings Limited (Goldcool)
   F-47




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RMB
    
    
    Amortization periodCash and cash equivalents
    
    
    26,729,861Account receivables
    
    
    1,755,595Other current assets
    
    
    1,933,894Acquired intangible assets:Trademark
    
    
    9,410,000
    
    
    20 yearsCompleted technology
    
    
    17,140,000
    
    
    3~6 yearsCore technology
    
    
    24,420,000
    
    
    6 yearsCustomer base
    
    
    6,370,000
    
    
    5 yearsPurchased in-process research and development
    
    
    23,870,000Non-current deferred tax liability
    
    
    (17,083,648
    )Goodwill allocated to Shanda Games segment
    
    
    25,077,420Property and equipment, net
    
    
    10,202,990Other non-current assets
    
    
    924,459Current liabilities
    
    
    (10,833,276
    )Non-controlling interest
    
    
    82,705Total purchase price
    
    
    120,000,000
   (3) Eyedentity
   F-48




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Total purchase price:
    
    RMBCash paid by Shanda Games to acquire the outstanding shares of Eyedentity
    
    
    510,022,504Cash paid by Shanda Games to replace options issued by Eyedentity
    
    
    19,176,393Share based compensation related to post combination portion
    
    
    (8,399,397
    )520,799,500
 RMB
    
    
    Amortization periodCash and cash equivalents
    
    
    25,600,071Account receivables
    
    
    36,443,251Other current assets
    
    
    468,345Acquired intangible assets:Completed technology
    
    
    270,376,850
    
    
    6 yearsCore technology
    
    
    85,812,300
    
    
    10 yearsNon-compete agreement
    
    
    13,621,000
    
    
    3 yearsPurchased in-process research and development
    
    
    89,217,550Non-current deferred tax liability
    
    
    (102,692,836
    )Goodwill allocated to Shanda Games segment
    
    
    123,425,354Property and equipment, net
    
    
    5,990,437Other non-current assets
    
    
    12,849,831Current liabilities
    
    
    (40,312,653
    )Total purchase price
    
    
    520,799,500
   (4) Ku6 Holding Limited (Ku6 Holding)
   F-49




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Total purchase price:
    
    RMBOrdinary shares issued by Hurray Holding to acquired
all of the outstanding shares of Ku6 Holding
    
    
    185,018,771Ordinary shares issued by Hurray Holding to replace the
options issued by Ku6 Holding
    
    
    12,104,424Share based compensation related to post combination portion
    
    
    (8,770,813
    )188,352,382
 RMB
    
    
    Amortization periodCash and cash equivalents
    
    
    2,251,083Account receivables
    
    
    22,286,107Other current assets
    
    
    5,542,286Acquired intangible assets:Trademark
    
    
    170,000,000
    
    
    20 yearsSoftware technology
    
    
    15,000,000
    
    
    7 yearsCustomer base
    
    
    10,000,000
    
    
    5 yearsNon-current deferred tax liability
    
    
    (32,946,429
    )Goodwill allocated to Ku6 segment
    
    
    42,549,736Property and equipment, net
    
    
    24,935,478Other non-current assets
    
    
    6,400,000Current liabilities
    
    
    (77,665,880
    )Total purchase price
    
    
    188,352,382
    (5) Tianjin Rongshuxia Information Co., Ltd. (Rongshuxia)
    F-50




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RMB
    
    
    Amortization PeriodCash and cash equivalents
    
    
    7,403,858Acquired identifiable intangible assets:Brand name
    
    
    2,500,000
    
    
    20 yearsUser List
    
    
    700,000
    
    
    5 yearsGoodwill allocated to literature segment
    
    
    3,631,435Current liabilities
    
    
    (2,400,000
    )Non-current deferred tax liabilities
    
    
    (200,000
    )Non-controlling interests at fair value
    
    
    (4,735,294
    )Total consideration transferred to Rongshuxia
    
    
    6,900,000
     (6) Tianjin Zhongzhi Bowen Book Co., Ltd. (Zhongzhi Bowen)
    F-51




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RMB
    
    
    Amortization PeriodCash and cash equivalents
    
    
    70,074,167Accounts receivable
    
    
    1,459,055Inventories
    
    
    18,221,795Other current assets
    
    
    5,610,605Acquired intangible assets:Bookstore relationship
    
    
    47,800,000
    
    
    9.8 yearsCopyright
    
    
    16,200,000
    
    
    9.8 yearsGain on bargain purchase
    
    
    (6,500,443
    )Property and equipment, net
    
    
    76,464Deferred tax assets
    
    
    2,120,700Current liabilities
    
    
    (45,000,000
    )Non-current deferred tax liabilities
    
    
    (11,854,500
    )Non-controlling interests at fair value
    
    
    (48,107,843
    )Total consideration transferred to Zhongzhi Bowen
    
    
    50,100,000
      F-52




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(7) Tianjin Shengda Tianfang Tingshu Information Technology Co., Ltd.(Tianfang Tingshu)
      RMBTotal consideration transferred to Tianfang Tingshu and selling
shareholders:Consideration transferred to Tiangfang Tingshu and Selling shareholders
    
    
    7,500,000Fair value of the put option
    
    
    (100,000
    )7,400,000
  F-53




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##### Table of Contents



RMB
    
    
    Amortization PeriodCash and cash equivalents
    
    
    4,200,000Other current assets
    
    
    1,700,000Acquired intangible assets:Brand name
    
    
    4,800,000
    
    
    19.58 yearsUser list
    
    
    1,000,000
    
    
    5 yearsGoodwill allocated to literature segment
    
    
    446,429Deferred tax assets
    
    
    2,075,000Non-current deferred tax liabilities
    
    
    (1,450,000
    )Fair value of redeemable non-controlling interests
    
    
    (3,671,429
    )Total consideration transferred to Tianfang Tingshu and selling shareholders
    
    
    7,400,000
     (8) Acquisition of Xiaoxiang Shuyuan (Tianjin) Culture Development Co., Ltd. (Xiaoxiang
Shuyuan)
    F-54




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RMB
    
    
    Amortization PeriodCash and cash equivalents
    
    
    7,068,639Other current assets
    
    
    947,621Acquired intangible assets:Brand name
    
    
    6,700,000
    
    
    19.6 yearsWriter contracts
    
    
    5,200,000
    
    
    5.6 yearsTelecom relationship
    
    
    100,000
    
    
    9.6 yearsUser list
    
    
    900,000
    
    
    5.0 yearsGoodwill allocated to literature segment
    
    
    1,036,515Property and equipment, net
    
    
    47,735Non-current deferred tax liabilities
    
    
    (3,225,000
    )Non-controlling interests at fair value
    
    
    (8,150,510
    )Total consideration transferred to
Xiaoxiang Shuyuan and selling
shareholders
    
    
    10,625,000
     (9) Acquisition of Tianjin Yueduwang Technology Co., Ltd. (Cuilong)
    F-55




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RMBTotal consideration transferred to Cuilong and selling shareholders:Consideration transferred to Cuilong and selling shareholders
    
    
    9,100,000Contingent consideration receivable
    
    
    (5,678,571
    )3,421,429
 RMB
    
    
    Amortization PeriodCash and cash equivalents
    
    
    4,040,131Accounts receivable
    
    
    143,911Other current assets
    
    
    5,450,111Acquired intangible assets:Brand name
    
    
    3,700,000
    
    
    19.2 yearsUser list
    
    
    400,000
    
    
    5 yearsGain on bargain purchase
    
    
    (897,102
    )Property and equipment, net
    
    
    208,806Current liabilities
    
    
    (627,999
    )Non-current deferred tax liabilities
    
    
    (1,025,000
    )Non-controlling interests at fair value
    
    
    (7,971,429
    )Total consideration transferred to Cuilong and selling shareholders
    
    
    3,421,429
   F-56




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(10) Acquisition of Beijing Wangwen Xinyue Technology Co., Ltd. (Wangwen Xinyue)
      RMBTotal consideration transferred to Wangwen Xinyue and selling
shareholders:Consideration transferred to Wangwen Xinyue and selling shareholders
    
    
    27,500,000Contingent Consideration
    
    
    27,500,000
  F-57




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RMB
    
    
    Amortization PeriodCash and cash equivalents
    
    
    6,390,234Accounts receivable
    
    
    2,043,235Other current assets
    
    
    238,039Acquired intangible assets:Brand name
    
    
    10,100,000
    
    
    19.7 yearsWriter contracts
    
    
    10,000,000
    
    
    5.7 yearsCopyright
    
    
    500,000
    
    
    5.7 yearsTelecom relationship
    
    
    2,200,000
    
    
    9.7 yearsUser list
    
    
    400,000
    
    
    5 yearsGoodwill allocated to literature segment
    
    
    25,571,731Property and equipment, net
    
    
    214,300Current liabilities
    
    
    (3,415,981
    )Non-current deferred tax liabilities
    
    
    (5,600,000
    )Fair value of redeemable non-controlling interests
    
    
    (21,141,558
    )Total consideration transferred to Wangwen Xinyue and selling shareholders
    
    
    27,500,000
     (11) Acquisition of Sun Shine Holdings (BVI) Limited (Sun Shine)
   F-58




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RMB
    
    
    Amortization periodCash and cash equivalents
    
    
    8,189,230Account receivables
    
    
    35,869,448Other current assets
    
    
    90,164,704Intangible assets
    
    
    127,779,474
    
    
    1~3 yearsGoodwill to allocated to other segment
    
    
    41,245,372Property and equipment, net
    
    
    1,596,482Other non-current assets
    
    
    1,583,281Current liabilities
    
    
    (182,701,318
    )Long term liabilities
    
    
    (36,000,000
    )Non-controlling interest
    
    
    (14,621,112
    )Total purchase price
    
    
    73,105,561
    (12) Other acquisitions
      F-59




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RMBCash and cash equivalents
    
    
    15,058,738Account receivables
    
    
    3,650,161Other current assets
    
    
    17,339,028Acquired intangible assets
    
    
    80,006,725Goodwill
    
    
    46,331,994Property and equipment, net
    
    
    19,028,439Other non-current assets
    
    
    1,645,165Current liabilities
    
    
    (36,223,786
    )Long term liabilities
    
    
    (26,224,072
    )Non-current deferred tax liabilities
    
    
    (18,839,810
    )Non-controlling interest
    
    
    (19,279,410
    )Total purchase price
    
    
    82,493,172
     F-60




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##### Table of Contents



Unaudited Pro-forma information on 2010 acquisitions
   December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMBNet revenues
    
    
    5,449,189,288
    
    
    
    5,666,776,735Net income attributable Shanda Interactive Entertainment Limited
    
    
    1,467,309,933
    
    
    
    567,920,009
  Acquisitions completed in 2009
 (1) Ku6 (formerly known as Hurray! Holding Co., Limited before August 17, 2010)
   RMBCash and cash equivalents
    
    
    331,222,000Short-term investments
    
    
    68,299,000Other current assets
    
    
    62,928,000Identifiable intangible assets
    
    
    161,149,000Goodwill
    
    
    25,935,000Other non-current assets
    
    
    12,529,000Current liabilities
    
    
    (71,289,000
    )Other non-current liabilities
    
    
    (2,020,000
    )Non-controlling interests at fair value
    
    
    (273,111,000
    )Purchase price
    
    
    315,642,000
  F-61




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##### Table of Contents



(2) Suzhou Jinyou Digital Technology Co., Ltd.
   RMBCash and cash equivalents
    
    
    2,354,000Other assets
    
    
    3,745,000Identifiable intangible assets
    
    
    118,021,000Deferred tax liabilities
    
    
    (29,505,000
    )Total liabilities
    
    
    (615,000
    )Non-controlling interests at fair value
    
    
    (24,000,000
    )Purchase price
    
    
    70,000,000
    F-62




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##### Table of Contents



(3) Chengdu Simo
   RMBCash
    
    
    6,374,000Other assets
    
    
    26,885,000Identifiable intangible assets
    
    
    104,300,000Purchased in-progress research and development
    
    
    6,000,000Deferred tax liabilities
    
    
    (11,723,000
    )Goodwill
    
    
    53,532,000Current liabilities
    
    
    (36,568,000
    )Purchase price
    
    
    148,800,000
  (4) Tianjing Huawen Tianxia Book Co., Ltd. (Huawen Tianxia)
    F-63




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RMBCash and cash equivalents
    
    
    45,000,500Inventory
    
    
    9,918,895Other assets
    
    
    4,368,858Identifiable intangible assets
    
    
    22,700,000Goodwill allocated to literature segment
    
    
    11,363,231Property and equipment, net
    
    
    295,246Deferred tax assets
    
    
    1,979,250Current liabilities
    
    
    (22,500,000
    )Non-current deferred tax liabilities
    
    
    (5,675,000
    )Non-controlling interests at fair value
    
    
    (27,450,980
    )Total consideration transferred to Huawen Tianxia
    
    
    40,000,000
   (5) Other acquisitions in 2009
    F-64




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##### Table of Contents



Acquisitions completed in 2008
    7. DISCONTINUED OPERATIONS
   May 31, 2010RMBCurrent assets:Cash
    
    
    4,574,427Accounts receivable, net of allowance
    
    
    6,106,914Prepaid expenses and other current assets
    
    
    3,885,41914,566,760Non-current assets:Property and equipment, net
    
    
    445,147Intangible assets
    
    
    1,210,275Goodwill
    
    
    686,261Other non-current assets
    
    
    223,7462,565,429Current liabilities:Accounts payable
    
    
    5,009,771Accrued expenses and other current liabilities
    
    
    7,304,17212,313,943Non-current liabilities:Non-current deferred tax liabilities
    
    
    302,567Non-controlling interests:
    
    
    1,431,981
  F-65




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##### Table of Contents



2009
    
    
    2010RMB
    
    
    RMBTotal net revenues
    
    
    5,420,884
    
    
    
    15,780,640Cost of revenues
    
    
    (4,564,396
    )
    
    
    (10,733,940
    )Gross profit
    
    
    856,488
    
    
    
    5,046,700Operating expenses
    
    
    (5,860,196
    )
    
    
    (5,140,981
    )Loss from operations
    
    
    (5,003,708
    )
    
    
    (94,281
    )Interest and other income
    
    
    12,540
    
    
    
    39,201Loss before income tax
    
    
    (4,991,168
    )
    
    
    (55,080
    )Income tax benefit
    
    
    22,779
    
    
    
    8,130Net loss
    
    
    (4,968,389
    )
    
    
    (46,950
    )Less: Net loss attributable to the non-controlling interests
    
    
    2,432,847
    
    
    
    11,055Net loss from discontinued operations, net of tax
    
    
    (2,535,542
    )
    
    
    (35,895
    )Gain from disposal of Huayi Music
    
    
    
    
    
    
    30,604,371Total (loss) income from discontinued operations
    
    
    (2,535,542
    )
    
    
    30,568,476
 8. OTHER INCOME, NET
 2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBGovernment financial incentives
    
    
    62,253,380
    
    
    
    221,879,333
    
    
    
    272,926,369Donation expenses
    
    
    (17,475,876
    )
    
    
    (2,150,000
    )
    
    
    (22,618,976
    )Gain on bargain purchase
    
    
    
    
    
    
    
    
    
    
    7,397,545Foreign exchange gain (loss)
    
    
    (7,834,393
    )
    
    
    (5,700,933
    )
    
    
    788,501Gain on previously held equity interest
    
    
    
    
    
    
    
    
    
    
    4,742,116Others
    
    
    (7,562,643
    )
    
    
    (10,450,712
    )
    
    
    (8,405,279
    )29,380,468
    
    
    
    203,577,688
    
    
    
    254,830,276
   9. TAXATION
 Cayman Islands
   F-66




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British Virgin Islands
  Hong Kong
  China
      F-67




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Taiwan
  Korea
   F-68




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##### Table of Contents



United States
  Composition of income tax expense
  2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBCurrent income tax expenses
    
    
    226,226,624
    
    
    
    437,321,556
    
    
    
    393,699,607Deferred income tax benefits
    
    
    (9,755,523
    )
    
    
    (21,160,024
    )
    
    
    (23,940,614
    )Withholding taxes
    
    
    60,000,000
    
    
    
    69,635,112
    
    
    
    Income tax expenses
    
    
    276,471,101
    
    
    
    485,796,644
    
    
    
    369,758,993
 Reconciliation of the differences between statutory tax rate and the effective tax rate
  2008
    
    
    2009
    
    
    2010Statutory income tax rate
    
    
    25
    %
    
    
    25
    %
    
    
    25
    %Tax differential from statutory rate
applicable to the subsidiaries and the VIE
subsidiaries
    
    
    (12
    %)
    
    
    (14
    %)
    
    
    (13
    %)Enacted tax rate change
    
    
    (1
    %)
    
    
    
    
    
    
    Effect of tax holidays
    
    
    (5
    %)
    
    
    (1
    %)
    
    
    (8
    %)Effect of the withholding taxes
    
    
    4
    %
    
    
    3
    %
    
    
    Effect of change in valuation allowance
    
    
    4
    %
    
    
    4
    %
    
    
    21
    %Non-deductible expenses
    
    
    3
    %
    
    
    5
    %
    
    
    7
    %Effective income tax rate
    
    
    18
    %
    
    
    22
    %
    
    
    32
    %
  F-69




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##### Table of Contents



2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBThe aggregate net income effect
    
    
    81,125,328
    
    
    
    26,044,547
    
    
    
    94,365,491Basic share effect
    
    
    0.57
    
    
    
    0.19
    
    
    
    0.79Diluted share effect
    
    
    0.56
    
    
    
    0.19
    
    
    
    0.77
 The Groups deferred tax assets and deferred tax liabilities at each balance sheet date are
as follows:
 December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMBDeferred tax assetsLicensing fees and related costs and deferred revenues
    
    
    33,507,663
    
    
    
    45,276,201Accrued expenses and inventory provision
    
    
    100,489,180
    
    
    
    135,353,780Less: Valuation allowances
    
    
    (18,492,331
    )
    
    
    (55,484,598
    )Current deferred tax assets
    
    
    115,504,512
    
    
    
    125,145,384Tax losses carry forward
    
    
    78,681,097
    
    
    
    258,348,323Other temporary differences
    
    
    10,120,589
    
    
    
    34,610,700Foreign tax credit
    
    
    117,557,522
    
    
    
    156,939,825Development costs
    
    
    9,825,670
    
    
    
    10,755,001Less: Valuation allowances
    
    
    (197,186,848
    )
    
    
    (432,179,615
    )Non-current deferred tax assets
    
    
    18,998,030
    
    
    
    28,474,234Deferred tax liabilitiesRevenue recognition
    
    
    
    
    
    
    18,204,455Withholding taxes
    
    
    92,683,791
    
    
    
    92,683,791Intangible assets arising from business combination
    
    
    15,164,878
    
    
    
    1,259,133Current deferred tax liabilities
    
    
    107,848,669
    
    
    
    112,147,379Intangible assets arising from business combination
    
    
    65,020,798
    
    
    
    389,971,837Non-current deferred tax liabilities
    
    
    65,020,798
    
    
    
    389,971,837
 Movement of valuation allowances
 2009
    
    
    2010RMB
    
    
    RMBAt beginning of year
    
    
    59,680,349
    
    
    
    215,679,179Consolidation of subsidiaries
    
    
    50,028,771
    
    
    
    41,807,356Current year additions
    
    
    108,252,671
    
    
    
    234,068,747Disposal of subsidiaries
    
    
    
    
    
    
    (2,216,126
    )Current year reversals
    
    
    (2,282,612
    )
    
    
    (1,674,943
    )At end of year
    
    
    215,679,179
    
    
    
    487,664,213
  F-70




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2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBBalance at the beginning of the year
    
    
    9,427,110
    
    
    
    9,427,110
    
    
    
    9,427,110Additions for tax positions of the current year
    
    
    
    
    
    
    
    
    
    
    Balance at the end of the year
    
    
    9,427,110
    
    
    
    9,427,110
    
    
    
    9,427,110
     F-71




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##### Table of Contents



10. EARNINGS PER SHARE
  2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBNumerator:Income attributable to Shanda Interactive
from continuing operations for basic
earnings per ordinary share
    
    
    1,228,674,196
    
    
    
    1,595,099,813
    
    
    
    583,582,492Income (loss) attributable to Shanda
Interactive from discontinued operations for
basic earnings per ordinary share
    
    
    
    
    
    
    (2,535,542
    )
    
    
    30,568,476Net income attributable to Shanda
Interactive for basic earnings per ordinary
share
    
    
    1,228,674,196
    
    
    
    1,592,564,271
    
    
    
    614,150,968Income attributable to Shanda Interactive
from continuing operations for basic
earnings per ordinary share
    
    
    1,228,674,196
    
    
    
    1,595,099,813
    
    
    
    583,582,492Less: Dilution from Shanda Games
    
    
    
    
    
    
    (7,249,131
    )
    
    
    (109,055
    )Income attributable to Shanda Interactive
from continuing operations for diluted
earnings per ordinary share
    
    
    1,228,674,196
    
    
    
    1,587,850,682
    
    
    
    583,473,437Income (loss) attributable to Shanda
Interactive from discontinued operations for
diluted earnings per ordinary share
    
    
    
    
    
    
    (2,535,542
    )
    
    
    30,568,476Net income attributable to Shanda
Interactive for diluted earnings per
ordinary share
    
    
    1,228,674,196
    
    
    
    1,585,315,140
    
    
    
    614,041,913Denominator:Weighted-average ordinary shares outstanding
for basic calculation
    
    
    142,991,542
    
    
    
    134,265,829
    
    
    
    120,125,785Dilutive effect of share options
    
    
    1,683,360
    
    
    
    1,936,559
    
    
    
    1,293,407Dilutive effect of convertible notes
    
    
    
    
    
    
    2,301,529
    
    
    
    1,656,052Denominator for diluted earnings per share
    
    
    144,674,902
    
    
    
    138,503,917
    
    
    
    123,075,244Earnings per share-BasicIncome attributable to Shanda Interactive
from continuing operations
    
    
    8.59
    
    
    
    11.88
    
    
    
    4.86Income (loss) attributable to Shanda
Interactive from discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.25Net income attributable to Shanda Interactive
    
    
    8.59
    
    
    
    11.86
    
    
    
    5.11Earnings per share-DilutedIncome attributable to Shanda Interactive
from continuing operations
    
    
    8.49
    
    
    
    11.47
    
    
    
    4.74Income (loss) attributable to Shanda
Interactive from discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    0.25Net income attributable to Shanda Interactive
    
    
    8.49
    
    
    
    11.45
    
    
    
    4.99
     F-72




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11. CASH AND CASH EQUIVALENTS
    12. ACCOUNTS RECEIVABLE
 December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMBAccounts receivable
    
    
    155,714,628
    
    
    
    291,742,897Less: Allowance for doubtful accounts
    
    
    (40,004,497
    )
    
    
    (31,469,351
    )115,710,131
    
    
    
    260,273,546
  2009
    
    
    2010RMB
    
    
    RMBBalance at beginning of year
    
    
    43,145,109
    
    
    
    40,004,497Add: Current year additions
    
    
    10,147,259
    
    
    
    34,929,494Add: Consolidation of subsidiaries
    
    
    
    
    
    
    686,509Less: Current year reversal
    
    
    
    
    
    
    (11,076,711
    )Less: Current year write-offs
    
    
    (13,287,871
    )
    
    
    (33,074,438
    )Balance at end of year
    
    
    40,004,497
    
    
    
    31,469,351
  F-73




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##### Table of Contents



13. INVENTORIES
 December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMBFinished goods
    
    
    8,659,808
    
    
    
    48,728,409Raw materials
    
    
    10,664,541
    
    
    
    19,700,353Work in progress
    
    
    
    
    
    
    15,948,032Inventory held with distributors on consignment
    
    
    11,572,418
    
    
    
    46,431,781Total inventories
    
    
    30,896,767
    
    
    
    130,808,575
  14. INVESTMENTS IN EQUITY AND COST METHOD INVESTEES
 Investments accounted for under the equity method
  December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMB
    
    
    EffectivepercentageownershipDalian King-Dian Network Development Co., Ltd. (King-Dian)
    
    
    10,000,000
    
    
    
    9,845,953
    
    
    
    20.00
    %Beijing Jinjiang Networking Technology Co., Ltd. (Jinjiang)
    
    
    8,776,740
    
    
    
    12,801,372
    
    
    
    50.00
    %Shanghai Xunshi Networking Technology Co., Ltd. (Xunshi)
    
    
    2,223,247
    
    
    
    551,646
    
    
    
    39.05
    %Anipark Co., Ltd. (Anipark)
    
    
    6,750,316
    
    
    
    3,023,689
    
    
    
    9.21
    %Huaian Shibo Numeral Technology Co., Ltd.(Huaian Shibo)
    
    
    3,655,413
    
    
    
    3,275,363
    
    
    
    45.00
    %Shanghai Shanda Modern Family Magazine Co., Ltd (Shanda Family)
    
    
    3,241,314
    
    
    
    3,517,467
    
    
    
    49.00
    %Hangzhou Aodian Technology Co., Ltd. (Aodian)
    
    
    624,000
    
    
    
    254,400
    
    
    
    20.00
    %Shanghai Shengguang Networking Technology Co., Ltd. (Shengguang)
    
    
    913,225
    
    
    
    679,822
    
    
    
    39.05
    %Shanghai Orient Youth Culture Co., Ltd. (Orient Youth)
    
    
    97,207
    
    
    
    46,163
    
    
    
    30.00
    %Shanghai Guangyu Networking Technology Co., Ltd. (Guangyu)
    
    
    2,000,000
    
    
    
    
    
    
    
    Shanghai Gewa Business info consulting Co., Ltd. (Gewa)
    
    
    1,883,053
    
    
    
    2,268,919
    
    
    
    47.00
    %Chengdu Yunduan Networking Technology Co., Ltd. (Yunduan)
    
    
    2,550,000
    
    
    
    4,040,297
    
    
    
    20.00
    %Hangzhou Miusike Networking Technology Co., Ltd. (Miusike)
    
    
    
    
    
    
    14,582,479
    
    
    
    26.00
    %Beijing Jietong Wuxian Networking Technology Co., Ltd. (Jietong)
    
    
    
    
    
    
    26,757,594
    
    
    
    30.00
    %Beijing Wende Zhiyuan Culture Communication Co. Ltd. (Wende)
    
    
    
    
    
    
    17,642,910
    
    
    
    43.00
    %Hangzhou Soushi Networking Co., Ltd. (Soushi)
    
    
    
    
    
    
    25,000,000
    
    
    
    32.00
    %Chengdu Ledong Information Technology Co., Ltd. (Ledong)
    
    
    
    
    
    
    22,000,000
    
    
    
    34.00
    %
  F-74




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##### Table of Contents



December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMB
    
    
    EffectivepercentageownershipBeijing Yicheng Tianxia Technology Co., Ltd. (Yicheng)
    
    
    
    
    
    
    7,841,776
    
    
    
    28.84
    %Chengdu Awata Network Technology Co., Ltd. (Awata)
    
    
    
    
    
    
    5,000,000
    
    
    
    14.42
    %Shanghai Maishi Information Technology Co., Ltd. (Maishi)
    
    
    
    
    
    
    5,228,558
    
    
    
    14.42
    %Shijiazhuang Hailan Online Game Development Co., Ltd. ( Hailan)
    
    
    
    
    
    
    3,661,050
    
    
    
    14.42
    %Shanghai Lantian Information Technology Co., Ltd. (Lantian)
    
    
    
    
    
    
    2,866,012
    
    
    
    16.22
    %Beijing Jimu Huanshuo Technology Co., Ltd. (Jimu)
    
    
    
    
    
    
    5,000,000
    
    
    
    30.00
    %Beijing Chuangye Weilai Technology Co., Ltd. (Chuangye Weilai)
    
    
    
    
    
    
    9,565,235
    
    
    
    30.00
    %Shengzhen Juling Info Technology Co., Ltd. (Juling)
    
    
    
    
    
    
    4,000,000
    
    
    
    30.00
    %Hangzhou Xuecheng Networking Technology Co., Ltd. (Xuecheng)
    
    
    
    
    
    
    2,829,784
    
    
    
    30.00
    %Ningbo Wanglian Networking Co., Ltd (Wanglian)
    
    
    
    
    
    
    2,531,134
    
    
    
    35.00
    %Shanghai Fanghezi Business Co., Ltd. (Fanghezi)
    
    
    
    
    
    
    2,528,884
    
    
    
    35.00
    %Shanghai Shimai Networking Technology Co., Ltd. (Shimai)
    
    
    
    
    
    
    2,203,066
    
    
    
    25.00
    %Shanghai Sheshou Info Technology Co., Ltd. (Sheshou)
    
    
    
    
    
    
    2,410,934
    
    
    
    20.00
    %Others
    
    
    2,619,704
    
    
    
    12,230,233Total
    
    
    45,334,219
    
    
    
    214,184,740
  Share of profit /(loss) on
    
    
    Amortization of
    
    
    
    
    
    
    TransferredBalances at
    
    
    
    
    
    
    affiliated
    
    
    identifiable
    
    
    
    
    
    
    out due to
    
    
    Balances atDecember 31,
    
    
    
    
    
    
    companies
    
    
    intangible assets,
    
    
    Other equity
    
    
    consolidation
    
    
    December 31,2008
    
    
    Investments
    
    
    investments
    
    
    net of tax
    
    
    movement
    
    
    (Note 6)
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Orient Youth
    
    
    117
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97Shanda Family
    
    
    3,065
    
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,242Sunray
    
    
    4,570
    
    
    
    
    
    
    
    (4,570
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jinjiang
    
    
    9,108
    
    
    
    
    
    
    
    (332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,776Xunshi
    
    
    7,500
    
    
    
    
    
    
    
    (4,662
    )
    
    
    (615
    )
    
    
    
    
    
    
    
    
    
    
    2,223Zhongcheng
    
    
    6,069
    
    
    
    5,731
    
    
    
    (11,800
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Caiqu
    
    
    4,000
    
    
    
    15,000
    
    
    
    (459
    )
    
    
    
    
    
    
    
    
    
    
    (18,541
    )
    
    
    Anipark
    
    
    3,910
    
    
    
    
    
    
    
    2,192
    
    
    
    
    
    
    
    649
    
    
    
    
    
    
    
    6,751Huaian Shibo
    
    
    3,800
    
    
    
    
    
    
    
    
    
    
    
    (145
    )
    
    
    
    
    
    
    
    
    
    
    3,655Weilai
    
    
    3,333
    
    
    
    11,667
    
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Aodian
    
    
    2,000
    
    
    
    
    
    
    
    (1,376
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    624Shengguang
    
    
    1,332
    
    
    
    
    
    
    
    (418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    914Guangyu
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000Gewa
    
    
    
    
    
    
    2,000
    
    
    
    (117
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,883Yunduan
    
    
    
    
    
    
    2,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,550King-Dian
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Others
    
    
    2,408
    
    
    
    11,105
    
    
    
    (11,975
    )
    
    
    (1,425
    )
    
    
    2,506
    
    
    
    
    
    
    
    2,619Total
    
    
    51,212
    
    
    
    60,053
    
    
    
    (48,360
    )
    
    
    (2,185
    )
    
    
    3,155
    
    
    
    (18,541
    )
    
    
    45,334
  F-75




---



##### Table of Contents



Share of profit /(loss) on
    
    
    Amortization of
    
    
    
    
    
    
    TransferredBalances at
    
    
    
    
    
    
    affiliated
    
    
    identifiable
    
    
    
    
    
    
    out due to
    
    
    Balances atDecember 31,
    
    
    
    
    
    
    companies
    
    
    intangible assets,
    
    
    Other equity
    
    
    consolidation
    
    
    December 31,2009
    
    
    Investments
    
    
    investments
    
    
    net of tax
    
    
    movement
    
    
    (Note 6)
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Orient Youth
    
    
    97
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46Shanda Family
    
    
    3,242
    
    
    
    
    
    
    
    275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,517Jinjiang
    
    
    8,776
    
    
    
    
    
    
    
    4,025
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,801Xunshi
    
    
    2,223
    
    
    
    
    
    
    
    (1,672
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    551Anipark
    
    
    6,751
    
    
    
    
    
    
    
    (3,849
    )
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    3,024Huaian Shibo
    
    
    3,655
    
    
    
    
    
    
    
    (380
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,275Aodian
    
    
    624
    
    
    
    
    
    
    
    (370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254Shengguang
    
    
    914
    
    
    
    
    
    
    
    (233
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    681Guangyu
    
    
    2,000
    
    
    
    
    
    
    
    (742
    )
    
    
    
    
    
    
    
    
    
    
    (1,258
    )
    
    
    Gewa
    
    
    1,883
    
    
    
    1,000
    
    
    
    (614
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,269Yunduan
    
    
    2,550
    
    
    
    2,000
    
    
    
    (510
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,040King-Dian
    
    
    10,000
    
    
    
    
    
    
    
    (154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,846Miusike
    
    
    
    
    
    
    15,000
    
    
    
    (418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,582Jietong
    
    
    
    
    
    
    27,000
    
    
    
    (242
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,758Wende
    
    
    
    
    
    
    17,754
    
    
    
    (111
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,643Soushi
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Ledong
    
    
    
    
    
    
    22,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,000Yicheng
    
    
    
    
    
    
    8,000
    
    
    
    (158
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,842Awata
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Maishi
    
    
    
    
    
    
    4,800
    
    
    
    429
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,229Lantian
    
    
    
    
    
    
    3,000
    
    
    
    (134
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,866Hailan
    
    
    
    
    
    
    4,000
    
    
    
    (339
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,661Jimu
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Chuangye Weilai
    
    
    
    
    
    
    10,000
    
    
    
    (435
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,565Juling
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Xuecheng
    
    
    
    
    
    
    3,000
    
    
    
    (170
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,830Wanglian
    
    
    
    
    
    
    2,500
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,531Fanghezi
    
    
    
    
    
    
    3,000
    
    
    
    (471
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,529Shimai
    
    
    
    
    
    
    3,000
    
    
    
    (797
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,203Sheshou
    
    
    
    
    
    
    2,500
    
    
    
    (89
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,411Others
    
    
    2,619
    
    
    
    12,006
    
    
    
    (1,814
    )
    
    
    
    
    
    
    
    
    
    
    (580
    )
    
    
    12,231Total
    
    
    45,334
    
    
    
    179,560
    
    
    
    (8,993
    )
    
    
    
    
    
    
    122
    
    
    
    (1,838
    )
    
    
    214,185
 Investments accounted for under the cost method
    F-76




---



##### Table of Contents



15. MARKETABLE SECURITIES
  2009Cost
    
    
    Unrealized gain
    
    
    Fair valueRMB
    
    
    RMB
    
    
    RMBMutual funds
    
    
    9,897,517
    
    
    
    1,674,090
    
    
    
    11,571,607Equity securities
    
    
    2,830,411
    
    
    
    6,388,998
    
    
    
    9,219,409Total
    
    
    12,727,928
    
    
    
    8,063,088
    
    
    
    20,791,016
 2010Cost
    
    
    Unrealized gain
    
    
    Fair valueRMB
    
    
    RMB
    
    
    RMBMutual funds
    
    
    9,897,517
    
    
    
    1,677,090
    
    
    
    11,564,607Equity securities
    
    
    2,830,411
    
    
    
    2,547,244
    
    
    
    5,377,655Total
    
    
    12,727,928
    
    
    
    4,214,334
    
    
    
    16,942,262
 16. PROPERTY AND EQUIPMENT
  2009
    
    
    2010RMB
    
    
    RMBComputer equipment
    
    
    484,334,144
    
    
    
    742,177,260Leasehold improvements
    
    
    21,733,441
    
    
    
    87,176,124Furniture and fixtures
    
    
    35,284,879
    
    
    
    58,112,286Motor vehicles
    
    
    27,387,413
    
    
    
    32,892,503Office buildings
    
    
    291,078,312
    
    
    
    291,729,925Less: Accumulated depreciation
    
    
    (378,455,962
    )
    
    
    (496,685,584
    )Net book value
    
    
    481,362,227
    
    
    
    715,402,514
  17. INTANGIBLE ASSETS
  2009
    
    
    2010RMB
    
    
    RMBGross carrying amount:Upfront licensing fee paid
    
    
    599,819,796
    
    
    
    750,911,153Software, copyrights and others
    
    
    169,637,909
    
    
    
    239,854,918Intangible assets arising from business combinations- Software technology
    
    
    354,385,761
    
    
    
    992,523,039- In-progress research and development
    
    
    9,072,821
    
    
    
    122,160,371- Non-compete arrangement
    
    
    24,360,507
    
    
    
    40,199,215- Customer base
    
    
    273,785,027
    
    
    
    289,580,406- Trademarks and brand name
    
    
    63,533,912
    
    
    
    518,955,706- Bookstore relationship
    
    
    13,300,000
    
    
    
    61,100,000- Other
    
    
    56,211,281
    
    
    
    73,902,5471,564,107,014
    
    
    
    3,089,187,355
  F-77




---



##### Table of Contents



2009
    
    
    2010RMB
    
    
    RMBLess: accumulated amortizationUpfront licensing fee paid
    
    
    (285,146,355
    )
    
    
    (414,587,870
    )Software, copyrights and others
    
    
    (147,010,050
    )
    
    
    (195,813,398
    )Intangible assets arising from business combinations- Software technology
    
    
    (162,417,811
    )
    
    
    (277,262,745
    )- In-progress research and development
    
    
    (1,021,314
    )
    
    
    (5,061,989
    )- Non-compete arrangement
    
    
    (4,827,305
    )
    
    
    (10,898,888
    )- Customer base
    
    
    (35,687,183
    )
    
    
    (82,595,547
    )- Trademarks and brand name
    
    
    (18,222,066
    )
    
    
    (44,008,164
    )- Bookstore relationship
    
    
    (1,023,078
    )
    
    
    (6,746,155
    )- Other
    
    
    (6,840,940
    )
    
    
    (11,073,727
    )(662,196,102
    )
    
    
    (1,048,764,039
    )Less: ImpairmentUpfront licensing fee paid
    
    
    (20,095,454
    )
    
    
    (20,095,454
    )Net book value
    
    
    881,815,458
    
    
    
    2,020,327,862
    AmortizationRMB2011
    
    
    408,958,7662012
    
    
    354,902,6292013
    
    
    301,047,7162014
    
    
    214,892,4362015
    
    
    165,290,530Total
    
    
    1,445,092,077
  F-78




---



##### Table of Contents



18. GOODWILL
  Balances at
    
    
    
    
    
    
    Effect of
    
    
    Balance at
    
    
    
    
    
    
    Effect of
    
    
    Balances atGross amount of
    
    December 31,
    
    
    
    
    
    
    exchange rate
    
    
    December 31,
    
    
    
    
    
    
    exchange rate
    
    
    December 31,goodwill
    
    2008
    
    
    Acquisitions
    
    
    changes
    
    
    2009
    
    
    Acquisitions
    
    
    changes
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Haofang
    
    
    346,583
    
    
    
    
    
    
    
    
    
    
    
    346,583
    
    
    
    
    
    
    
    
    
    
    
    346,583Bianfeng
    
    
    106,170
    
    
    
    
    
    
    
    
    
    
    
    106,170
    
    
    
    
    
    
    
    
    
    
    
    106,170Actoz
    
    
    86,479
    
    
    
    
    
    
    
    
    
    
    
    86,479
    
    
    
    
    
    
    
    
    
    
    
    86,479Aurora
    
    
    26,130
    
    
    
    
    
    
    
    
    
    
    
    26,130
    
    
    
    
    
    
    
    
    
    
    
    26,130Simo
    
    
    
    
    
    
    53,531
    
    
    
    
    
    
    
    53,531
    
    
    
    
    
    
    
    
    
    
    
    53,531Ku6
    
    
    
    
    
    
    25,935
    
    
    
    (9
    )
    
    
    25,926
    
    
    
    47,050
    
    
    
    119
    
    
    
    73,095Mochi
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,617
    
    
    
    
    
    
    
    163,617Goldcool
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,077
    
    
    
    
    
    
    
    25,077Eyedentity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,425
    
    
    
    
    
    
    
    123,425Rongshuxia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,631
    
    
    
    
    
    
    
    3,631Wangwen Xinyue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,572
    
    
    
    
    
    
    
    25,572Sun Shine
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,245
    
    
    
    
    
    
    
    41,245Xiaoxiang Shuyuan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,037
    
    
    
    
    
    
    
    1,037Tianfang Tingshu
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,446
    
    
    
    
    
    
    
    1,446Others
    
    
    39,404
    
    
    
    
    
    
    
    
    
    
    
    39,404
    
    
    
    59,974
    
    
    
    
    
    
    
    99,378Total
    
    
    604,766
    
    
    
    79,466
    
    
    
    (9
    )
    
    
    684,223
    
    
    
    491,387
    
    
    
    119
    
    
    
    1,176,416
 Balances at
    
    
    
    
    
    
    Effect of
    
    
    Balance at
    
    
    
    
    
    
    Effect of
    
    
    Balances atAccumulated
    
    December 31,
    
    
    
    
    
    
    exchange rate
    
    
    December 31,
    
    
    
    
    
    
    exchange rate
    
    
    December 31,impairment
    
    2008
    
    
    Impairment
    
    
    changes
    
    
    2009
    
    
    Impairment
    
    
    changes
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Haofang
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,000
    )
    
    
    
    
    
    
    (15,000
    )Bianfeng
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Actoz
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Aurora
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Simo
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ku6
    
    
    
    
    
    
    (3,984
    )
    
    
    
    
    
    
    (3,984
    )
    
    
    
    
    
    
    
    
    
    
    (3,984
    )Mochi
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Goldcool
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Eyedentity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rongshuxia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Wangwen Xinyue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sun Shine
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Xiaoxiang Shuyuan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tianfang Tingshu
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    (14,498
    )
    
    
    
    
    
    
    
    
    
    
    (14,498
    )
    
    
    
    
    
    
    
    
    
    
    (14,498
    )Total
    
    
    (14,498
    )
    
    
    (3,984
    )
    
    
    
    
    
    
    (18,482
    )
    
    
    (15,000
    )
    
    
    
    
    
    
    (33,482
    )
 Net carrying
    
    Balance at
    
    
    Balances atamount
    
    December 31, 2009
    
    
    December 31, 2010RMB000
    
    
    RMB000Haofang
    
    
    346,583
    
    
    
    331,583Bianfeng
    
    
    106,170
    
    
    
    106,170Actoz
    
    
    86,479
    
    
    
    86,479Aurora
    
    
    26,130
    
    
    
    26,130Simo
    
    
    53,531
    
    
    
    53,531Ku6
    
    
    21,942
    
    
    
    69,111Mochi
    
    
    
    
    
    
    163,617Goldcool
    
    
    
    
    
    
    25,077Eyedentity
    
    
    
    
    
    
    123,425Rongshuxia
    
    
    
    
    
    
    3,631Wangwen Xinyue
    
    
    
    
    
    
    25,572Sun Shine
    
    
    
    
    
    
    41,245Xiaoxiang Shuyuan
    
    
    
    
    
    
    1,037Tianfang Tingshu
    
    
    
    
    
    
    1,446Others
    
    
    24,906
    
    
    
    84,880Total
    
    
    665,741
    
    
    
    1,142,934
  F-79




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.
     19. FAIR VALUE MEASUREMENTS
    F-80




---



##### Table of Contents



Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantYear ended
    
    
    Active Markets for
    
    
    Other Observable
    
    
    UnobservableDescription
    
    December 31, 2009
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Marketable
securities-Common stock and
mutual fund
    
    
    20,791,016
    
    
    
    20,791,016
    
    
    
    
    
    
    
    Investment in securities
    
    
    7,000,000
    
    
    
    
    
    
    
    
    
    
    
    7,000,000Foreign currency
forward contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financial liability
related to forward contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    27,791,016
    
    
    
    20,791,016
    
    
    
    
    
    
    
    7,000,000
 Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantYear ended
    
    
    Active Markets for
    
    
    Other Observable
    
    
    UnobservableDescription
    
    December 31, 2010
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Marketable
securitiesCommon
stock and mutual fund
    
    
    16,942,262
    
    
    
    16,942,262
    
    
    
    
    
    
    
    Investment in securities
    
    
    41,630,500
    
    
    
    
    
    
    
    
    
    
    
    41,630,500Contingent
consideration
receivable
    
    
    5,678,571
    
    
    
    
    
    
    
    
    
    
    
    5,678,571Total
    
    
    64,251,333
    
    
    
    16,942,262
    
    
    
    
    
    
    
    47,309,071
  F-81




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##### Table of Contents



Fair Value MeasurementsUsing SignificantUnobservable Inputs (Level 3)Investment in SecuritiesAt January 1, 2009
    
    
    Current year purchase
    
    
    7,000,000December 31, 2009
    
    
    7,000,000Increase in investment
    
    
    34,103,500Unrealized gain in value
    
    
    500,000December 31, 2010
    
    
    41,630,500
  At January 1, 2010
    
    
    Current year addition upon acquisition of Cuilong
    
    
    5,678,571December 31, 2010
    
    
    5,678,571
  Quoted Prices in
    
    
    Significant
    
    
    SignificantYear ended
    
    
    Active Markets for
    
    
    Other Observable
    
    
    UnobservableDescription
    
    December 31, 2009
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Total losses(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Goodwill
    
    
    665,740,540
    
    
    
    
    
    
    
    
    
    
    
    665,740,540
    
    
    
    3,984,343
 Quoted Prices in
    
    
    Significant
    
    
    SignificantYear ended
    
    
    Active Markets for
    
    
    Other Observable
    
    
    UnobservableDescription
    
    December 31, 2010
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Total losses(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Goodwill
    
    
    1,142,934,128
    
    
    
    
    
    
    
    
    
    
    
    1,142,934,128
    
    
    
    15,000,000Other long
term assets
    
    
    235,647,719
    
    
    
    
    
    
    
    
    
    
    
    235,647,719
    
    
    
    10,172,528Total
    
    
    1,378,581,547
    
    
    
    
    
    
    
    
    
    
    
    1,378,581,547
    
    
    
    25,172,528
   F-82




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##### Table of Contents



20. OTHER PAYABLES AND ACCRUALS
 2009
    
    
    2010RMB
    
    
    RMBSalary and welfare payable
    
    
    181,740,404
    
    
    
    254,394,547Unpaid advertisement and promotion fee
    
    
    229,496,086
    
    
    
    206,351,495Unpaid rental for server software
    
    
    48,435,022
    
    
    
    1,906,556Advance from customers
    
    
    66,115,682
    
    
    
    94,254,418Accrued interest for convertible debt
    
    
    7,453,640
    
    
    
    7,413,878Unpaid audit fee
    
    
    19,289,841
    
    
    
    23,383,744Acquisition related obligation
    
    
    48,800,000
    
    
    
    67,623,584Deposits from distributors
    
    
    33,257,943
    
    
    
    23,505,933Payable to employees due to exercise of options
    
    
    54,470,589
    
    
    
    5,432,180Research & design fee payable
    
    
    13,182,148
    
    
    
    15,048,916Reimbursement payable
    
    
    2,839,581
    
    
    
    12,123,893Accrued litigation
    
    
    
    
    
    
    4,938,776Other payables
    
    
    82,480,575
    
    
    
    110,534,129Total
    
    
    787,561,511
    
    
    
    826,912,049
 21. CONVERTIBLE DEBT
 Accounting
for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial
Cash Settlement)
  F-83




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##### Table of Contents



As previouslyreported
    
    
    Adjustment
    
    
    As adjustedRMB
    
    
    RMB
    
    
    RMBConsolidated Statements of Operations:Year ended December 31, 2008Interest expense
    
    
    (10,295,375
    )
    
    
    (19,727,723
    )
    
    
    (30,023,098
    )Net Income
    
    
    1,248,401,919
    
    
    
    (19,727,723
    )
    
    
    1,228,674,196Basic earnings per share
    
    
    8.73
    
    
    
    (0.14
    )
    
    
    8.59Diluted earnings per share
    
    
    8.63
    
    
    
    (0.14
    )
    
    
    8.49Consolidated Balance Sheet:December 31, 2008Convertible debt
    
    
    1,196,055,000
    
    
    
    (196,193,578
    )
    
    
    999,861,422Additional paid-in capital
    
    
    1,230,162,337
    
    
    
    701,525,180
    
    
    
    1,931,687,517Accumulated other comprehensive loss
    
    
    (133,609,677
    )
    
    
    (347,841
    )
    
    
    (133,957,518
    )Retained earnings
    
    
    2,343,110,727
    
    
    
    (504,983,761
    )
    
    
    1,838,126,966
 2.0% Convertible Senior Notes due 2011 (Notes)
     F-84




---



##### Table of Contents



Accounting for Derivative Instruments and Hedging Activities
      2009
    
    
    2010RMB
    
    
    RMBEquity component
    
    
    186,170,446
    
    
    
    186,106,044Liability componentPrincipal amount
    
    
    1,135,263,360
    
    
    
    1,100,765,590Less: unamortized discount
    
    
    (121,399,459
    )
    
    
    (48,003,058
    )Net carrying amount of the liability component
    
    
    1,013,863,901
    
    
    
    1,052,762,532
  F-85




---



##### Table of Contents



22.
    
    REDEEMABLE PREFERRED SHARES ISSUED BY A SUBSIDIARY AND REDEEMABLE NON-CONTROLLING INTEREST Redeemable preferred shares issued by a subsidiary
    a. Dividends:
   F-86




---



##### Table of Contents



b. Liquidation preference
  c. Voting rights
  d. Conversion
   e. Redemption
    F-87




---



##### Table of Contents



Redeemable non-controlling interests
  December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMBTianfang Tingshu
    
    
    
    
    
    
    3,134,086Wangwen Xinyue
    
    
    
    
    
    
    22,162,159
    
    
    
    25,296,245
 Arising from
    
    
    
    
    
    
    
    
    Balance atBalances at
    
    
    Business
    
    
    Share of
    
    
    Share-Based
    
    
    December 31,January 1, 2010
    
    
    Combination
    
    
    Profit/(Loss)
    
    
    Compensation
    
    
    2010RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Tianfang Tingshu
    
    
    
    
    
    
    3,671,429
    
    
    
    (537,343
    )
    
    
    
    
    
    
    3,134,086Wangwen Xinyue
    
    
    
    
    
    
    21,141,558
    
    
    
    613,927
    
    
    
    406,674
    
    
    
    22,162,159Total
    
    
    
    
    
    
    24,812,987
    
    
    
    76,584
    
    
    
    406,674
    
    
    
    25,296,245
 23. NON-CONTROLLING INTERESTS
   December 31,
    
    
    December 31,2009
    
    
    2010RMB
    
    
    RMBNon-controlling interests in consolidated subsidiaries or VIE subsidiariesShanda Games
    
    
    1,142,704,542
    
    
    
    1,585,168,623Ku6
    
    
    230,396,325
    
    
    
    207,268,902Shine Show
    
    
    
    
    
    
    97,289,214Zhongzhi Bowen
    
    
    
    
    
    
    45,809,445Jinyou
    
    
    24,841,955
    
    
    
    36,283,450Others
    
    
    45,326,415
    
    
    
    83,037,8781,443,269,237
    
    
    
    2,054,857,512
  2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBNet income attributable to Shanda Interactive
    
    
    1,228,674,196
    
    
    
    1,592,564,271
    
    
    
    614,150,968Transfers (to) from the non-controlling interestsIncrease in additional paid-in capital for
sale of 140,913,000 Shanda Games Class A
ordinary shares
    
    
    
    
    
    
    5,993,051,794
    
    
    
    Increase in additional paid-in capital
for issuance of ordinary shares to acquire
Ku6 Holding by Hurray Holding
    
    
    
    
    
    
    
    
    
    
    41,031,687Increase in additional paid-in capital for
issuance of ordinary shares to acquire Mochi
by Shanda Games
    
    
    
    
    
    
    
    
    
    
    15,765,633Increase in additional paid-in capital for
purchase of equity investments by Shanda
Games from other entities under common
control
    
    
    
    
    
    
    
    
    
    
    2,442,547
  F-88




---



##### Table of Contents



2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBIncrease in additional paid-in capital for
capital contribution by non-controlling
shareholders
    
    
    
    
    
    
    
    
    
    
    635,320Decrease in additional paid-in capital for
repurchase of shares by Shanda Games
    
    
    
    
    
    
    
    
    
    
    (113,974,438
    )Decrease in additional paid-in capital for
purchase of additional equity interest in Ku6
    
    
    
    
    
    
    (2,644,156
    )
    
    
    2,845,547Decrease in additional paid-in capital for
purchase of wireless value added service and
recorded music businesses from Hurray Holding
    
    
    
    
    
    
    
    
    
    
    (38,937,610
    )Decrease in additional paid-in capital for
purchase of additional equity interest in
other subsidiaries
    
    
    
    
    
    
    (2,033,278
    )
    
    
    (1,855,557
    )Decrease in additional paid-in capital for
capital contribution to a subsidiary by the
Company
    
    
    
    
    
    
    (3,745,253
    )
    
    
    Change from net income attributable to Shanda
Interactive and transfers (to) from
non-controlling interests
    
    
    1,228,674,196
    
    
    
    7,577,193,378
    
    
    
    522,104,097
 24. REPURCHASE OF SHARES
     F-89




---



##### Table of Contents



25. EQUITY COMPENSATION PLAN
 (1) Shanda Interactive Entertainment Limited
 2003 Share Incentive Plan
    2005 Equity Compensation Plan
   F-90




---



##### Table of Contents



Activities of share options
  Weighted AverageOptions
    
    
    Weighted Average
    
    
    remaining
    
    
    AggregateOutstanding
    
    
    Exercise Price
    
    
    contractual life
    
    
    Intrinsic valueUS$
    
    
    
    
    
    US$Outstanding at January 1, 2010
    
    
    2,558,176
    
    
    
    8.78Granted
    
    
    
    
    
    
    Exercised
    
    
    (673,952
    )
    
    
    8.50Forfeited
    
    
    (15,000
    )
    
    
    8.45Expired
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    1,869,224
    
    
    
    8.88
    
    
    
    3.85
    
    
    
    20,833,124Vested and expected to vest at
December 31, 2010
    
    
    1,858,360
    
    
    
    8.86
    
    
    
    3.86
    
    
    
    20,359,058Vested and exercisable at December
31, 2010
    
    
    1,639,225
    
    
    
    8.16
    
    
    
    5.04
    
    
    
    19,117,337
  F-91




---



##### Table of Contents



2008Risk-free interest rate (1)
    
    
    2.37%-3.52
    %Expected life (in years) (2)
    
    5 yearsExpected dividend yield (3)
    
    
    0
    %Expected volatility (4)
    
    
    59
    %Fair value per option at grant date
    
    RMB
    46.65-61.94
 (1)
    
    The risk-free interest rate for periods within the contractual life of the share option is
based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent with
the expected term of the awards.(2)
    
    The expected term of stock options granted under the Plan is developed giving consideration
to vesting period, contractual term and historical exercise pattern.(3)
    
    The Company has no history or expectation of paying dividends on its common stock.(4)
    
    Expected volatility is estimated based on the historical volatility of comparable companies
stocks and of Shandas common stock for a period equal to the expected term preceding the grant
date. (2) Shanda Games Limited (Shanda Games)
 Shanda Games 2008 Equity Compensation Plan
   F-92




---



##### Table of Contents



F-93




---



##### Table of Contents



WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateOptions
    
    
    Average
    
    
    Contractual
    
    
    IntrinsicOutstanding
    
    
    Exercise Price
    
    
    Life
    
    
    ValueUS$
    
    
    
    
    
    US$Vested and exercisable at December 31, 2009
    
    
    25,555,200
    
    
    
    3.20
    
    
    
    
    
    
    
    Granted
    
    
    7,768,163
    
    
    
    2.99Exercised
    
    
    (1,403,548
    )
    
    
    2.63Forfeited
    
    
    (8,708,587
    )
    
    
    3.25Expired
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    23,211,228
    
    
    
    3.18
    
    
    
    8.34
    
    
    
    2,224,590Vested and expected to vest at December 31, 2010
    
    
    21,863,951
    
    
    
    3.17
    
    
    
    8.33
    
    
    
    2,198,980Vested and exercisable at December 31, 2010
    
    
    5,182,199
    
    
    
    3.21
    
    
    
    7.96
    
    
    
    175,564
     F-94




---



##### Table of Contents



For the years ended December 312008
    
    
    2009Exercise Price
    
    US$
    3.2
    
    
    US$
    3.20~US$3.98Fair value of ordinary shares
    
    US$
    3.13
    
    
    US$
    3.90~US$6.25Risk-free interest rate(1)
    
    
    3.94
    %
    
    
    3.31%~4.44
    %Exercise multiple(2)
    
    
    1.8
    
    
    
    1.8Expected dividend yield(3)
    
    
    0
    %
    
    
    0
    %Expected volatility(4)
    
    
    50
    %
    
    
    50
    %Fair value per option at grant date (in RMB)
    
    
    10.4~11.8
    
    
    
    14.1~26.8
 
 (1)
    
    The risk-free interest rate for periods within the contractual life of the share option is
based on the U.S. Treasury yield curve over the contractual term of the option in effect at
the time of grant.(2)
    
    The management estimates the options will be exercised when the spot price reaches 1.8 times
of strike price after becoming exercisable.(3)
    
    Shanda Games has no history or expectation of paying dividends on its ordinary shares.(4)
    
    Expected volatility is estimated based on the historical volatility of comparable companies
stocks and of Shandas ordinary shares for a period equal to the expected term preceding the
grant date.  For the year ended December 312009
    
    
    2010Exercise Price
    
    US$
    5.29~US$5.38
    
    
    US$
    0.23~US$3.40Fair value of ordinary shares
    
    US$
    5.12~US$5.16
    
    
    US$
    2.50~US$5.21Risk-free interest rate(1)
    
    
    2.13%~2.48
    %
    
    
    1.00%~2.5
    %Expected life (in years)(2)
    
    
    5
    
    
    
    5Expected dividend yield(3)
    
    
    0
    %
    
    
    0
    %Expected volatility(4)
    
    
    50
    %
    
    
    50
    %Fair value per option at grant date (in RMB)
    
    
    15.82~15.84
    
    
    
    7.31~33.52
 (1)
    
    The risk-free interest rate for periods within the contractual life of the share option is
based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent
with the expected term of the awards.(2)
    
    The expected term of stock options granted is developed giving consideration to vesting
period, contractual term and historical exercise pattern of options granted by Shanda.(3)
    
    Shanda Games has no history or expectation of paying dividends on its ordinary shares.(4)
    
    Expected volatility is estimated based on the historical volatility of comparable companies
stocks and of Shandas ordinary shares for a period equal to the expected term preceding the
grant date.   F-95




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##### Table of Contents



Weighted AverageGrant-date FairUnvested Restricted Shares
    
    Number of Shares
    
    
    ValueUS$Unvested at December 31, 2009
    
    
    6,725,190
    
    
    
    6.0Granted
    
    
    5,413,279
    
    
    
    4.1Vested
    
    
    (2,022,688
    )
    
    
    5.5Forfeited
    
    
    (489,549
    )
    
    
    5.5Unvested at December 31, 2010
    
    
    9,626,232
    
    
    
    5.2Expected to vest at December 31, 2010
    
    
    8,473,034
    
    
    
    5.1
   (3) Actoz Soft Co., Ltd
      F-96




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##### Table of Contents



For the years ended December 312008
    
    
    2010Risk-free interest rate
    
    
    4.80-5.39
    %
    
    
    4.56
    %Expected life (in years)
    
    4.7-4.9 years
    
    4.5-4.9 yearsExpected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    63%-87
    %
    
    
    65%-67
    %Fair value per option at grant date( in KRW)
    
    
    4,531~6,355
    
    
    
    7,504~7,668
 Activities of share options
  Weighted AverageOptions
    
    
    Weighted Average
    
    
    Remaining
    
    
    AggregateOutstanding
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Intrinsic ValueKRW
    
    
    
    
    
    KRWDecember 31, 2009
    
    
    412,490
    
    
    
    9,398
    
    
    
    4.66
    
    
    
    3,156,394Granted
    
    
    102,666
    
    
    
    14,250
    
    
    
    
    
    
    
    Exercised
    
    
    (75,551
    )
    
    
    9,378
    
    
    
    
    
    
    
    Forfeited
    
    
    (56,443
    )
    
    
    9,532
    
    
    
    
    
    
    
    December 31, 2010
    
    
    383,162
    
    
    
    10,682
    
    
    
    4.38
    
    
    
    301,206Vested and expected to vest
as of December 31, 2010
    
    
    368,502
    
    
    
    10,542
    
    
    
    4.30
    
    
    
    301,094Vested and exercisable as
of December 31, 2010
    
    
    214,000
    
    
    
    9,346
    
    
    
    3.63
    
    
    
    236,267
      F-97




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##### Table of Contents



(4) Cloudary
 Cloudary 2010 Equity Compensation Plan
         Weighted averageOptions
    
    
    Weighted Average
    
    
    remaining
    
    
    AggregateOutstanding
    
    
    Exercise Price
    
    
    contractual life
    
    
    Intrinsic valueUS$
    
    
    
    
    
    US$Outstanding at January 1, 2010
    
    
    
    
    
    
    Granted
    
    
    11,000,750
    
    
    
    1.8Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    11,000,750
    
    
    
    1.8
    
    
    
    5.92
    
    
    
    Vested and expected to vest at December
31, 2010
    
    
    11,000,750
    
    
    
    1.8
    
    
    
    5.92
    
    
    
    Vested and exercisable at December 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  F-98




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##### Table of Contents



2010Risk-free interest rate (1)
    
    
    1.9%-2.3
    %Expected life (in years) (2)
    
    
    4.5-5Expected dividend yield (3)
    
    
    Expected volatility (4)
    
    
    50%-55
    %Fair value per option at grant date
    
    US$
    0.76-US$0.85
 (1)
    
    The risk-free interest rate for periods within the contractual life of the share
option is based on the rate of US$ China government bond yield in effect at the time of grant
for a term consistent with the expected term of the awards.(2)
    
    The expected term of share options granted under the Cloudarys 2010 Equity
Compensation Plan is developed giving consideration to vesting period, contractual term, share
price, employees level within the organization and the expected volatility of the underlying
shares.(3)
    
    Cloudary has no expectation of paying dividends on its common shares in future.(4)
    
    Expected volatility is estimated based on the historical data volatilities of the
comparable companies in similar industry as at the valuation dates. (5) Ku6
 2004 Share Incentive Plan
 Stock option
    F-99




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##### Table of Contents



WeightedWeighted
    
    
    AverageOptions
    
    
    Average Exercise
    
    
    Remaining
    
    
    AggregateOutstanding
    
    
    Price
    
    
    Contractual Life
    
    
    Intrinsic ValueUS$
    
    
    
    
    
    US$Outstanding at December 31, 2009
    
    
    45,582,700
    
    
    
    0.080
    
    
    
    3.63
    
    
    
    147,478Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (450,000
    )
    
    
    0.045
    
    
    
    
    
    
    
    Cancelled or Expired
    
    
    (548,000
    )
    
    
    0.113
    
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    44,584,700
    
    
    
    0.080
    
    
    
    2.63
    
    
    
    226,985Vested and expected to vest at December
31, 2010
    
    
    44,584,700
    
    
    
    0.080
    
    
    
    2.63
    
    
    
    226,985Vested and exercisable at December 31, 2010
    
    
    44,584,700
    
    
    
    0.080
    
    
    
    2.63
    
    
    
    226,985
  Non-vested shares
        Weighted averageNumber
    
    
    grant date fairNon-vested stock units
    
    outstanding
    
    
    valueUS$Outstanding at December 31, 2009
    
    
    3,000,100
    
    
    
    0.0313Granted
    
    
    
    
    
    
    Vested
    
    
    (3,000,100
    )
    
    
    0.0313Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    
    
    
    
    
  F-100




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##### Table of Contents



2010 Equity Compensation Plan
        F-101




---



##### Table of Contents



WeightedWeighted
    
    
    AverageOptions
    
    
    Average Exercise
    
    
    Remaining
    
    
    AggregateOutstanding
    
    
    Price
    
    
    Contractual Life
    
    
    Intrinsic ValueUS$
    
    
    
    
    
    US$Outstanding at January 1, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    516,750,000
    
    
    
    0.0568
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cancelled or Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    516,750,000
    
    
    
    0.0568
    
    
    
    6.46
    
    
    
    Vested and expected to vest at December
31, 2010
    
    
    355,129,632
    
    
    
    0.0568
    
    
    
    6.65
    
    
    
    Vested and exercisable at December 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
     2010Fair value of ordinary shares (US$)
    
    
    0.0800Exercise price (US$)
    
    
    0.0568Expected volatility (%)
    
    
    60%~65
    %Expected dividend yield (%)
    
    
    0
    %Expected term (years)
    
    
    4~5Risk-free interest rate (per annum) (%)
    
    
    1.9407%~2.6565
    %
 
 (1)
    
    The risk-free interest rate for periods within the contractual life of the share option is
based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent
with the expected term of the awards.(2)
    
    The expected term of stock options granted is developed giving consideration to vesting
period, contractual term and historical exercise pattern of options granted by Ku6.(3)
    
    Ku6 has no history or expectation of paying dividends on its common stock.(4)
    
    Expected volatility is estimated based on the historical volatility of comparable companies
stocks and of Ku6s common stock for a period equal to the expected term preceding the grant
date.  F-102




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##### Table of Contents



26. EMPLOYEE BENEFITS
  27. RELATED PARTY TRANSACTIONS
     28. DERIVATIVE
  29. CERTAIN RISKS AND CONCENTRATIONS
     F-103




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##### Table of Contents



30. COMMITMENTS AND CONTINGENCIES
 Operating lease agreements
  ComputerOffice premise
    
    
    equipment
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB2011
    
    
    92,259,858
    
    
    
    108,563,093
    
    
    
    200,822,9502012
    
    
    73,753,125
    
    
    
    1,049,402
    
    
    
    74,802,5272013
    
    
    36,074,609
    
    
    
    160,825
    
    
    
    36,235,4342014
    
    
    216,080
    
    
    
    
    
    
    
    216,0802015
    
    
    72,027
    
    
    
    
    
    
    
    72,027202,375,699
    
    
    
    109,773,320
    
    
    
    312,149,018
     F-104




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##### Table of Contents



Capital commitments
  Litigation
   Contingencies
 Accounting for Loss
Contingencies
   F-105




---



##### Table of Contents



31. SUBSEQUENT EVENTS
      F-106




---



##### Table of Contents



32. RESTRICTED NET ASSETS
   F-107




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 For the years ended December 31Note
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(Note 3)Net revenues
    
    
    
    
    281,540
    
    
    
    121,320
    
    
    
    121,320
    
    
    
    18,382Cost of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    
    281,540
    
    
    
    121,320
    
    
    
    121,320
    
    
    
    18,382Total operating expenses
    
    
    
    
    (74,026,769
    )
    
    
    (53,932,194
    )
    
    
    (46,538,187
    )
    
    
    (7,051,240
    )Loss from operations
    
    
    
    
    (73,745,229
    )
    
    
    (53,810,874
    )
    
    
    (46,416,867
    )
    
    
    (7,032,858
    )Interest income
    
    
    
    
    6,817,800
    
    
    
    2,867,783
    
    
    
    38,937,101
    
    
    
    5,899,561Interest expense
    
    
    
    
    (30,023,098
    )
    
    
    (99,777,779
    )
    
    
    (101,987,357
    )
    
    
    (15,452,630
    )Foreign exchange gain (loss)
    
    
    
    
    (3,385,935
    )
    
    
    (23
    )
    
    
    601
    
    
    
    91Other expense, net
    
    
    
    
    (265,155
    )
    
    
    (5,669
    )
    
    
    (42,688
    )
    
    
    (6,468
    )Investment income
    
    
    
    
    6,518,284
    
    
    
    
    
    
    
    
    
    
    
    Loss before income tax expense
    
    
    
    
    (94,083,333
    )
    
    
    (150,726,562
    )
    
    
    (109,509,210
    )
    
    
    (16,592,304
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity in profit of subsidiaries
    
    1
    
    
    1,322,757,529
    
    
    
    1,743,290,833
    
    
    
    723,660,178
    
    
    
    109,645,482Net income
    
    
    
    
    1,228,674,196
    
    
    
    1,592,564,271
    
    
    
    614,150,968
    
    
    
    93,053,178
  F-108




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONDENSED BALANCE SHEETS
 2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$(Note 3)ASSETSCurrent assets:Cash and cash equivalents
    
    
    444,984,761
    
    
    
    267,604,798
    
    
    
    40,546,182Short term investment
    
    
    273,128,000
    
    
    
    1,183,319,586
    
    
    
    179,290,846Due from related parties
    
    
    569,663,045
    
    
    
    1,755,973,005
    
    
    
    266,056,516Prepayments and other current assets
    
    
    38,782,923
    
    
    
    61,759,705
    
    
    
    9,357,531Total current assets
    
    
    1,326,558,729
    
    
    
    3,268,657,094
    
    
    
    495,251,075Investment in subsidiaries
    
    
    11,268,513,395
    
    
    
    12,107,344,669
    
    
    
    1,834,446,162Long-term assets
    
    
    14,266,277
    
    
    
    5,706,516
    
    
    
    864,625Total assets
    
    
    12,609,338,401
    
    
    
    15,381,708,279
    
    
    
    2,330,561,862LIABILITIESCurrent liabilities:Due to subsidiaries
    
    
    30,246,570
    
    
    
    5,602,205,870
    
    
    
    848,819,071Other payable and accruals
    
    
    19,063,099
    
    
    
    19,062,290
    
    
    
    2,888,226Deferred revenue
    
    
    141,535
    
    
    
    20,215
    
    
    
    3,063Convertible debt
    
    
    1,013,863,901
    
    
    
    1,052,762,532
    
    
    
    159,509,475Total liabilities
    
    
    1,063,315,105
    
    
    
    6,674,050,907
    
    
    
    1,011,219,835Shareholders equityOrdinary shares (US$0.01 par value,
186,000,000 shares authorized,
134,862,854 and 112,518,724 issued and
outstanding as of December 31, 2009 and
2010)
    
    
    11,278,654
    
    
    
    9,756,982
    
    
    
    1,478,331Additional paid-in capital
    
    
    8,345,532,165
    
    
    
    6,976,772,960
    
    
    
    1,057,086,812Accumulated other comprehensive loss
    
    
    (89,197,412
    )
    
    
    (191,122,267
    )
    
    
    (28,957,918
    )Retained earnings
    
    
    3,278,409,889
    
    
    
    1,912,249,697
    
    
    
    289,734,802Total shareholders equity
    
    
    11,546,023,296
    
    
    
    8,707,657,372
    
    
    
    1,319,342,027Total liabilities and shareholders equity
    
    
    12,609,338,401
    
    
    
    15,381,708,279
    
    
    
    2,330,561,862
  F-109




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE
SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONDENSED CASH FLOW STATEMENT
 For the years ended December 312008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(Note 3)Net cash used in operating activities
    
    
    (58,116,056
    )
    
    
    (37,273,632
    )
    
    
    (36,356,297
    )
    
    
    (5,508,530
    )Net cash provided by (used in) investing activities
    
    
    (237,934,346
    )
    
    
    (837,366,150
    )
    
    
    3,085,502,091
    
    
    
    467,500,317Net cash provided by (used in) financing activities
    
    
    276,075,578
    
    
    
    714,354,692
    
    
    
    (3,287,515,411
    )
    
    
    (498,108,396
    )Effect of foreign exchange rate changes on cash
    
    
    (39,981,014
    )
    
    
    (1,004,057
    )
    
    
    60,989,654
    
    
    
    9,240,857Net decrease in cash
    
    
    (59,955,838
    )
    
    
    (161,289,147
    )
    
    
    (177,379,963
    )
    
    
    (26,875,752
    )Cash, beginning of year
    
    
    666,229,746
    
    
    
    606,273,908
    
    
    
    444,984,161
    
    
    
    67,421,934Cash, end of year
    
    
    606,273,908
    
    
    
    444,984,161
    
    
    
    267,604,798
    
    
    
    40,546,182
  F-110




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##### Table of Contents



ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 SHANDA INTERACTIVE ENTERTAINMENT LIMITED
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
      2. COMMITMENTS
  3. FOREIGN CURRENCIES
   F-111